We develop a measure of (hybrid) defined benefit (DB) pension risk and show how this pension risk affects individual portfolio decisions. We find that people in riskier DB plans are, on average, not only less likely to hold equity but also hold a smaller share of their wealth in equity. This...

"By employing leverage to gain more exposure to stocks when young, individuals can achieve better diversification across time. Using stock data going back to 1871, we show that buying stock on margin when young combined with more conservative investments when older stochastically dominates...