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Household Portfolios and Retirement Saving over the Life Cycle

Author

Listed:
  • Jonathan A. Parker
  • Antoinette Schoar
  • Allison T. Cole
  • Duncan Simester

Abstract

This paper shows a dramatic change in the investment behavior of the U.S. middleclass. During the 2010s, the average share of investable wealth that people hold in stocks is roughly ten percent larger than in the 1990s, and now has a strong lifecycle pattern, rising modestly early in life and falling significantly as retirement approaches. These changes in portfolio allocation were facilitated by the Pension Protection Act (PPA) of 2006, which allowed employers to adopt target date funds (TDFs) as default options in retirement saving plans. Young workers enrolling at an employer shortly after its plan adopts TDFs as defaults have higher equity shares than those who enroll at that same employer shortly before. In contrast to what we find for portfolios, retirement contribution rates over the life-cycle have been relatively stable across cohorts over time, and we find no evidence that the PPA directly raised contribution rates on average.

Suggested Citation

  • Jonathan A. Parker & Antoinette Schoar & Allison T. Cole & Duncan Simester, 2022. "Household Portfolios and Retirement Saving over the Life Cycle," NBER Working Papers 29881, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29881
    Note: AG AP CF EFG ME
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    File URL: http://www.nber.org/papers/w29881.pdf
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    Cited by:

    1. Michael Weber & Bernardo Candia & Olivier Coibion & Yuriy Gorodnichenko, 2023. "Do You Even Crypto, Bro? Cryptocurrencies in Household Finance," NBER Working Papers 31284, National Bureau of Economic Research, Inc.
    2. Marta Cota, 2023. "Extrapolative Income Expectations and Retirement Savings," CERGE-EI Working Papers wp751, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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