Older Investors, Wider Bets: How retirement portfolios change with age

T. Rowe Price recently released a white paper, co-authored with experts from the Massachusetts Institute of Technology (MIT) Sloan School of Management and Stanford University, which reveals how retirement investors' allocation preferences and accumulated savings become more diverse with age.

Researchers from the three organizations looked at T. Rowe Price's 401(k) recordkeeping data and estimated that investors who are above the age of 50 have diverse preferences for equity exposure. Although most prefer a 60% to 80% equity allocation, 10% prefer to avoid equities altogether, 5% prefer an all-equity allocation, and others fall somewhere in between.

In contrast, most younger investors, those aged between 20 and 34, prefer high-equity exposure, typically over 80% – which aligns with life-cycle investing.

Additionally, older investors take a more active role when it comes to their retirement portfolios, the study said. Between 2019 and 2024, only 26% of older investors left their equity allocation unchanged, compared to 46% of younger investors. This highlights the potential desire for more dynamic portfolio management in the lead-up to retirement. And these findings highlight how investment preferences differ by age, underscoring the growing importance of personalized investment solutions later in life to drive better retirement outcomes, according to the study.

"At T. Rowe Price, our retirement research is fueled by curiosity," said Sudipto Banerjee, Ph.D., a global retirement strategist at T. Rowe Price, and co-author of the paper. "By deepening our understanding of the wide-ranging needs of retirement savers, including how they engage with their investments, we can better understand how to support these needs in each phase of their retirement journey. With older participants, we see that preferred asset allocation and financial circumstances are more diverse, making them strong candidates for personalized retirement solutions."

Major findings of the study

The study shared several key findings, including:

• Mental hurdles like inattention, not fear, keep people from investing. When investment hurdles are removed, participants may prefer traditional life-cycle investment patterns.
• Proactive shifts toward higher equity exposure increase with age. Among those who adjusted their equity allocation, 50% of investors aged 50 and older increased their equity exposure, compared to just 34% of those aged 20 to 34.

And what might be some of the reasons for these shifts? As Banerjee explained it, as people get older, some may choose to invest more in stocks for a few reasons. “First,” he said, “some retirees may think that they are lagging in savings and want to have more aggressive portfolios to catch-up. Second, as people gain experience with investing, they might feel more comfortable taking on additional risk and putting money into equities. Finally, older investors also have more assets and might be able to absorb more risk in their portfolio.”

• High fees and lack of participant engagement could limit the benefits of personalization. Transparent, carefully designed fee structures and clear communication to explain changes in default investments, their benefits, and the associated cost will be essential for the successful adoption of personalized investments, the study said.

And it is important for consumers to receive personalized investment solutions as they get older and move closer toward retirement. Personalized investment solutions become critical as investors approach retirement because their financial situations, risk tolerance, and income needs often diverge significantly, Banerjee said. “Factors such as health status, life expectancy, lifestyle preferences, and legacy goals all impact optimal portfolio construction. Tailored solutions help ensure that investment strategies align with individual goals and constraints, reducing anxiety and improving retirement outcomes,” he added.

Offering personalized investment solutions

And what are some of the steps that financial advisors can take to offer personalized investment solutions to their older clients? According to Banerjee, advisors can support older clients by:

• Conducting comprehensive financial and risk assessments that consider health, lifestyle, and legacy objectives.
• Creating dynamic, tax-aware withdrawal strategies tailored to individual spending needs and market conditions.
• Regularly adjusting financial plans as clients’ circumstances and market conditions evolve.
• Coaching clients on how to act during periods of market turmoil and educating them about the trade-offs between income, growth, and risk.

"Collaborating with T. Rowe Price allows us to bring academic theory to life through large-scale, real-world data," said Taha Choukhmane, Ph.D., assistant professor of finance at MIT Sloan School of Management, and co-author of the paper. "Together, we're uncovering insights that deepen our understanding of investor behavior and help shape smarter, more effective retirement strategies, empowering savers to make informed decisions in a complex financial world."

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