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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12391.
Date of creation: Jul 2006
Date of revision:
Publication status: published as Courtney Coile & Kevin Milligan, 2009. "How Household Portfolios Evolve After Retirement: The Effect Of Aging And Health Shocks," Review of Income and Wealth, Blackwell Publishing, vol. 55(2), pages 226-248, 06.
Note: AG AP HC
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jonathan Skinner, 1993.
"Is Housing Wealth a Sideshow?,"
NBER Working Papers
4552, National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 2000. "Aging and Housing Equity," NBER Working Papers 7882, National Bureau of Economic Research, Inc.
- Kevin Milligan, 2005.
"Life-cycle asset accumulation and allocation in Canada,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 38(3), pages 1057-1106, August.
- Kevin Milligan, 2004. "Life-cycle Asset Accumulation and Allocation in Canada," Social and Economic Dimensions of an Aging Population Research Papers 122, McMaster University.
- Kevin Milligan, 2004. "Life-Cycle Asset Accumulation and Allocation in Canada," NBER Working Papers 10860, National Bureau of Economic Research, Inc.
- Steven F. Venti & David A. Wise, 1987.
"Aging, Moving, and Housing Wealth,"
NBER Working Papers
2324, National Bureau of Economic Research, Inc.
- Brian K. Bucks & Arthur B. Kennickell & Kevin B. Moore, 2006. "Recent changes in U.S. family finances: evidence from the 2001 and 2004 Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages A1-A38.
- Rosen, H.S.Harvey S. & Wu, Stephen, 2004.
"Portfolio choice and health status,"
Journal of Financial Economics,
Elsevier, vol. 72(3), pages 457-484, June.
- Samuelson, Paul A, 1969. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 239-46, August.
- Francisco Gomes & Alexander Michaelides, 2005.
"Optimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence,"
Journal of Finance,
American Finance Association, vol. 60(2), pages 869-904, 04.
- Gomes, Francisco J & Michaelides, Alexander, 2005. "Optimal Life-Cycle Asset Allocation: Understanding the Empirical Evidence," CEPR Discussion Papers 4853, C.E.P.R. Discussion Papers.
- Jonathan S. Feinstein & Chih-Chin Ho, 2001. "Elderly Asset Management and Health: An Empirical Analysis," Yale School of Management Working Papers ysm159, Yale School of Management.
- Steven F. Venti & David A. Wise, 1989.
"But They Don't Want to Reduce Housing Equity,"
NBER Working Papers
2859, National Bureau of Economic Research, Inc.
- Courtney C. Coile, 2004. "Health Shocks and Couples' Labor Supply Decisions," NBER Working Papers 10810, National Bureau of Economic Research, Inc.
- Jonathan Feinstein & Daniel McFadden, 1989.
"The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects,"
in: The Economics of Aging, pages 55-92
National Bureau of Economic Research, Inc.
- Jonathan Feinstein & Daniel McFadden, 1987. "The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects," NBER Working Papers 2471, National Bureau of Economic Research, Inc.
- Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-57, August.
- William G. Gale & Joel B. Slemrod, 2001. "Rethinking the Estate and Gift Tax: Overview," NBER Working Papers 8205, National Bureau of Economic Research, Inc.
- Alexander Michaelides & Francisco J. Gomes, 2005. "Optimal life cycle asset allocation : understanding the empirical evidence," LSE Research Online Documents on Economics 193, London School of Economics and Political Science, LSE Library.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.