Household Portfolio Choice and Retirement

Abstract

This study examines household portfolio choice through the retirement transition. I show that couples significantly decrease their stock allocations after retirement, whereas singles' allocations remain relatively unchanged. Reallocations are concentrated among couples in which the wife is more risk averse than her husband. Husbands' and wives' respective retirement events are followed by opposite-signed changes in stock allocations, as are husband's and wives' respective death events. These findings are consistent with a model of collective household decision making in which spouses have heterogeneous risk preferences, and suggest that dynamics in the distribution of intra-household bargaining power generate time-varying household risk aversion.

Keywords: Asset Allocation, Portfolio Choice, Household Finance, Bargaining Power, Risk Aversion

JEL Classification: G10, G11, G12, D14, D91