How Household Portfolios Evolve after Retirement: The Effect of Aging and Health Shocks

TitleHow Household Portfolios Evolve after Retirement: The Effect of Aging and Health Shocks
Publication TypeJournal Article
Year of Publication2009
AuthorsCoile, C, Milligan, KS
JournalReview of Income and Wealth
Volume59
Issue2
Pagination226-48
KeywordsNet Worth and Assets
Abstract

We study how the portfolios of U.S. households evolve after retirement, using data from the Health and Retirement Study (HRS). In particular, we investigate the influence of aging and health shocks on a household's ownership of various assets and on the share of total assets held in each asset class. We find that households decrease their ownership of principal residences, vehicles, financial assets, businesses, and real estate as they age, while increasing the share of assets held in liquid assets and time deposits. We find that widowhood and other health shocks are associated with the same kinds of portfolio changes, and that the effect of shocks strengthens with time since the shock. Finally, we show that the effect of a shock is greatly magnified when households have physical or mental impairments. This suggests that factors other than standard risk and return considerations weigh heavily in many older households' portfolio decisions.

Endnote Keywords

Retirement Wealth/Portfolio Choice/Assets/asset choice

Endnote ID

20720

Citation Key7344