How Household Portfolios Evolve After Retirement: The Effect of Aging and Health Shocks
AbstractIn this paper, we study how the portfolios of elderly 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%u2019s ownership of various assets and on the dollar value and share of total assets held in each asset class. We find that households decrease their ownership of most asset classes as they age, with the strongest evidence for principal residences and vehicles, while increasing the share of assets held in bank accounts and CDs. Consistent with prior studies, we find that the death of a spouse is a strong predictor of selling the principal residence. However, we find that widowhood also leads households to sell vehicles, businesses, and real estate and to put money into bank accounts and CDs, and further that other health shocks have very similar impacts. Finally, we explore why health shocks affect asset holdings and find 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 may weigh heavily in many older households%u2019 portfolio decisions.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12391.
Date of creation: Jul 2006
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Other versions of this item:
- Courtney Coile & Kevin Milligan, 2009. "How Household Portfolios Evolve After Retirement: The Effect Of Aging And Health Shocks," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 226-248, 06.
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-12 (All new papers)
- NEP-FMK-2006-08-12 (Financial Markets)
- NEP-HEA-2006-08-12 (Health Economics)
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