Milestone Birthday Events and Retirement Investment Behaviour

PAUL GERRANS, THE UNIVERSITY OF WESTERN AUSTRALIA, DAVID PITT, MACQUARIE UNIVERSITY, SIRIMON TREEPONGKARUNA, THE UNIVERSITY OF WESTERN AUSTRALIA

21 April 2017

This paper investigates individuals’ investment behaviour in their retirement savings surrounding milestone ages. Age is expected to play a key role in influencing investment choices, primarily through the risk of the investment strategy reflected in the asset allocation. Less clear is what particular age this occurs at or whether it is a smooth, incremental adjustment. We investigate whether milestone ages, that is those ending in “0” or “5”, play a role in the propensity to make investment changes. We utilise a large Australia retirement savings fund which provides the history of investment changes of a diverse sample of workers. We do find a clear role for age in the propensity to make investment changes. Pervasive milestone effects are not observed but we do observe some ages suggestive of milestone effects which are otherwise inconsistent with the expected age relationship. We also find a difference between genders surrounding the 50th milestone age.*

*This paper builds on work funded under a UWABS Research Development Award received by Gerrans and Treepongkaruna. Noted thanks to the invaluable research assistance of Jacqui Whale, UWA Business School.