Investment Decisions for Retirement Savings


  • The authors thank Pure Profile for their generous assistance with the development and implementation of the internet surveys and Gordon Clark for his helpful comments. The authors acknowledge support from the Centre for the Study of Choice, UTS, Thorp acknowledges support from the Faculty of Business, UTS, and Bateman and Thorp acknowledge financial support under ARC DP0877219.


We conducted a choice experiment to investigate whether retirement savers follow simple portfolio theory when choosing investments. We modeled experimental survey data on 693 participants using a scale-adjusted version of the latent class choice model. Results show that underlying variability in response was explained by age and “risk profile” score and that preferences varied with income and age. Younger individuals were conventionally risk averse, but older, higher-income individuals may react positively to both higher returns and increasing risk, when risk is presented as widening ranges of possible outcomes. Respondents tended to choose among a few similar investment options.