Wealth Holdings and Portfolio Allocation of the Elderly: The Role of Marital History

This paper investigates the role of marital history in terms of explaining differences in wealth holdings and portfolio allocation of older individuals by studying data drawn from the Health and Retirement Study. Consistent with the previous literature, the results generally suggest that both men and women suffer from the negative shocks of past marital dissolutions in terms of household wealth accumulation. The significance level, however, differs across married couples, single males, and single females. Among currently married couples, the wealth gap between the stably married households and those who have some marital disruption experience is small enough in terms of overall wealth levels. This possibly suggests that, for those who remarry after divorce, there is recovery from the sufferings of marital disruptions, which have occurred earlier in the life cycle. While marital history variables turn out to be minor factors in explaining the dispersion in wealth holdings of currently single males, they play a major role in understanding that of single females. This is clearly consistent with previous work which concluded that after divorce both men and women suffer a decrease in well-being, but women’s decline is far more serious than men’s. The examination of the asset components of net worth also indicates that both the probability of owning a particular asset and the fraction of wealth allocated to that asset might vary depending on the elderly individuals’ marital history. The results are mixed in terms of gender and current marital status, which remind us the role of remarriage and gender specific responses to household dissolutions.