Household Portfolios and Retirement Saving over the Life Cycle

Jonathan A. Parker; Antoinette Schoar; Allison T. Cole; Duncan Simester

doi:10.3386/w29881

Household Portfolios and Retirement Saving over the Life Cycle

Jonathan A. Parker, Antoinette Schoar, Allison T. Cole & Duncan Simester

Working Paper 29881

DOI 10.3386/w29881

Issue Date March 2022

Revision Date February 2025

US middle-class households invested 10% more of their investable wealth in the stock market in the past two decades than they did in the 1990s, and this share is now hump-shaped in age, declining after age 50. We present a range of evidence that the Pension Protection Act (PPA) — which allowed Target Date Funds (TDFs) as default options in retirement plans — played an important role. Younger (older) workers starting at the same firm after TDFs became the default option post-PPA, invested more (less) in stocks. in line with the TDF glide path. In contrast to portfolio allocations, contribution rates changed little following the PPA.

For helpful comments, we thank Jesse Bricker, Sylvain Catherine, Jim Poterba, Josh Rauh, John Sabelhaus, Eva Xu and participants at seminars at Boston College, Chicago, Columbia, LSE, MIT, Michigan, Minnesota, Stanford, and USC as well as the CEPR Household Finance Conference, the May 2022 Journal of Investment Management Conference, and the 2022 NBER Summer Institute Asset Pricing Meeting. We also thank Jiulei Zhu for excellent research assistance. All authors except Simester served as unpaid consultants for the financial services company that provided data for this paper. Simester served as a paid consultant of the company during this time. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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- data appendix
- March 22, 2022
- October 23, 2023

Household Portfolios and Retirement Saving over the Life Cycle

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