Browse by Type

Report #213 | | Members | Sign In

Pre- and Post- Retirement Asset Portfolios

The huge baby boomer generation is reaching retirement age. Their arrival has sparked fears of a market disruption if they all seek to sell investment assets at the same time. This research looks to solid historical data to address that fear.

  • Jinkook Lee PhD, Professor of Consumer Science and Research Associate at the Center for Human Resources Research at Ohio State University

Executive Summary

If you own a home in Bakersfield, California; Henderson, Nevada; or Homestead, Florida, in 2010, you’re well acquainted with the effects of an asset bubble. Many get excited and some get greedy, leading almost all to buy in droves, but when the music stops, nobody is left to buy. Real estate values that once seemed normal appear in retrospect garishly inflated. With the depths of the American mortgage crisis fresh in the collective memory, it’s easy to see the devastation caused by a quick run up in value followed by a market suddenly devoid of demand. Value disappears.

Consider, then, the prospect of a similar collapse in the equities market. Such a collapse might not be driven so much by speculation as by a quirk of demography: millions of baby boomers needing to sell stock holdings to fund retirement. This Filene report aims to quantify the risk of such a run and offer perspective for credit unions looking to serve the long-term asset-management needs of aging members.

What is the research about?

This report draws on the RAND Corporation’s Health and Retirement Study (HRS) to track the asset-selling trends of previous generations. Those data offer the financial asset portfolios for a nationally representative sample of U.S. adults at least 50 years of age for more than two decades, enabling us to describe the changes in asset portfolios and trends in direct stock holding and to explore what influences direct stock holding.

Stock holding has changed over time in the general population, but the holdings among older generations have generally moved in concert. So, it appears that the boomers’ retirement will be no more or less significant in the equities market than the retirements of previous generations. The researchers examine important individual variables, like education, age, and family situation, along with multivariate factors to elicit the most important factors affecting asset holdings before and after retirement.

What are the credit union implications?

Credit unions that offer investment services should pay attention to the research findings that show consumers—especially higher-wealth consumers—maintaining direct stock holdings long after retirement. Although it’s tempting to think that members will unload direct stock holdings at retirement, it’s also far too simplistic a view.

As credit union membership continues to age, it will be increasingly important to cater to members’ actual behavior. And while this research suggests that the baby boomer retirement surge will not depress the stock market in a significant way, it’s essential to ferret out the individual needs of retiring members. Just as the real estate market affected homeowners in Nevada, Michigan, and Texas differently, retirees’ needs are driven by individual circumstances.

Related Content