Portfolio Choice in Retirement Accounts: An Analysis of Longitudinal Data from Tiaa-Cref
TIAA-CREF Working Paper
Posted: 26 Nov 2001
Date Written: January 21, 1998
One of the key questions that arises when analyzing Social Security privatization is: What kind of portfolio choices would people make if they were offered individual accounts, and how would retirement income be affected by their choices?
This document provides a brief report on research that has been conducted on portfolio choices that TIAA-CREF participants have made over the ten year period from 1987 to 1996. The research is based on several sources of data, including a large panel dataset constructed at TIAA-CREF.
The data was used to study several empirical questions in an attempt to assess the importance of variation and diversity in financial behavior. These questions include: What relationships exist between the individual portfolio choices and characteristics such as sex, age, wealth, income, or education? How much diversity is there in behavior that is unexplained by the above factors? To what extent do individuals hold portfolios that are significantly skewed toward a single asset or asset class? What trends exist in the data and to what extent are these trends a function of changes in behavior of existing participants as opposed to changes in the population of participants? How active are participants in managing their retirement assets and how frequently do they change allocations of new contribution flows or existing balances?
In an additional section of the document the authors describe and discuss some of the details of the data used, another section approaches each of the above research questions and a final section offers conclusions.
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