How household portfolios evolve after retirement: The effect of aging and health shocks Kevin Milligan ~ Vancouver School of Economics ~ University of British Columbia

How household portfolios evolve after retirement: The effect of aging and health shocks

with Courtney Coile
Review of Income and Wealth, Vol. 55, No. 2, pp. 226-248.
Google Scholar entry.

Winner, 2009 Kendrick Prize Award for best article published in Review of Income and Wealth.

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.

Versions:

Published version, June, 2009: DOI.

Center for Retirement Research Issue Brief Number 56, November, 2006: Link.
Google Scholar entry.

NBER Working Paper No. 12391, July, 2006: Abstract/Paper.

Center for Retirement Research Working Paper No. 2005-17, December, 2005: Abstract/Paper.


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