Scott Cederburg Featured in The Economist for Retirement Investing Study

Scott Cederburg, professor of finance in the Eller College of Management, was recently featured in The Economist for his research on how older Americans are investing for retirement.

The article, Old Folk Are Seized by Stock Market Mania, highlights research by Cederburg and his colleagues Aizhan Anarkulova of Emory University and Michael O'Doherty of the University of Missouri. The team analyzed hundreds of years of financial data from 39 countries to understand how different investment strategies perform during retirement.

Traditionally, many people are advised to shift more of their savings into bonds as they get older, since bonds are often viewed as safer. But Cederburg's research found that bonds may not provide the protection or returns that retirees expect. His study showed that investors withdrawing 4 percent of their retirement savings each year have only a 7 percent chance of running out of money if they hold stocks, compared to a 39 percent chance if they invest only in bonds.

The findings are particularly relevant today, as Americans aged 70 and above now own 39 percent of all stocks and mutual funds—nearly twice as much as was common from 1989 to 2009. Many older investors are choosing to take on more risk in pursuit of higher returns.

While the research suggests that holding more stocks is likely to lead to better outcomes over time, retirees may face greater short-term risk during market downturns. An important challenge is that older investors must stick with stocks to realize the benefits.