This paper uses retirement as a natural experiment. Retirement creates a sudden jump in leisure time. That should reduce information-processing barriers. The question is: does having more time change how people trade, and does it improve outcomes?
The Role of Time Availability in Retail Trading Behavior: Evidence from Retired Investors
- Ebrahim Bazrafshan and Oscar Stålnacke
- Working paper, 2025
- A version of this paper can be found here
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Key Academic Insights
Time Is a Real Constraint on Retail Investing
The paper frames “information processing barriers” as a mix of time, effort, and attention required to turn market information into a trade. Even when investors are knowledgeable, limited time can keep them from engaging deeply. Retirement reduces this constraint sharply, making it a clean setting to test whether time changes behavior.
Retirees Trade More and Hold More Stocks
Using Swedish administrative and tax data, the authors track investors from two years before to two years after retirement. After retirement, people increase trading frequency and expand the number of stocks they hold. In the regressions, retirement is associated with about an 8% increase in the number of stocks held and about an 8% increase in annual trades. This is consistent with retirees having more time to monitor markets and make portfolio changes.
More Activity Doesn’t Translate Into Better Performance
Here’s the punchline: despite trading more and diversifying more, retirees earn lower risk-adjusted returns. Carhart alpha declines after retirement for both stock-only portfolios and combined stock plus mutual fund portfolios. In plain language, retirees become more active but, on average, that extra activity makes them worse relative to standard benchmarks.
Time Helps Participation. Skill Still Drives Results
The paper’s broader interpretation is a bit sobering. More free time reduces attention barriers and increases engagement, but it doesn’t automatically improve decision quality. Retirees may have more time, yet still face other limitations, including cognitive aging, overconfidence, or simply the difficulty of competing with professionals.
Practical Applications for Investment Advisors
Expect more trading activity around retirement
A retirement transition can change client behavior fast. Clients may start monitoring markets more, trading more, and experimenting with stock selection. Advisors should anticipate an “engagement spike,” not a retreat from markets.
Channel the new time into process, not prediction
Clients often interpret extra time as a reason to “do more” in markets. The evidence suggests “doing more” usually means lower risk-adjusted performance. A useful reframing is to guide clients toward better behaviors that time can actually support. rebalancing discipline, tax planning, thoughtful diversification, and staying consistent with the plan.
Reduce harmful trading by pre committing guardrails
If retirees are likely to trade more, advisors can lower the damage with simple guardrails like written investment policy statements, rebalancing bands, limits on individual stock concentration, and “cooling-off” rules for large discretionary trades. The goal is to keep increased engagement from turning into costly tinkering.
Position advice as a performance tool, not just a service
This paper is basically an argument that time is not a substitute for expertise. Advisors can use that framing to explain why professional guidance matters most when clients feel tempted to trade more. The value is not predicting markets. The value is designing a system that prevents self-inflicted underperformance.
Use retirement conversations to reset the benchmark
Many clients judge success by raw returns. The paper shows raw returns can look fine while risk-adjusted performance deteriorates. Advisors can educate clients to focus on outcomes that matter. meeting spending goals, managing downside risk, controlling taxes and fees, and maintaining a robust allocation.
How to Explain This to Clients
“Retirement gives you something incredibly valuable. time. Many people use that extra time to follow markets more closely and trade more often. The surprise is that, on average, this extra trading tends to reduce performance after adjusting for risk. So the goal isn’t to trade more because you can. The goal is to use your time to strengthen your plan. diversify sensibly, rebalance with discipline, and make decisions that support your long-term goals rather than react to short-term noise.”
The Most Important Chart from the Paper
This table presents the results on the effect of retirement on individual investors’ trading activity. The dependent variables are: (Column 1) the number of distinct companies held in the individual’s stock portfolio at year-end, and (Column 2) the number of changes made to the individual’s stock holdings between year t–1 and t. After retirement is a binary variable equal to 1 for the retirement year and the two subsequent years, and 0 for the two years preceding retirement. Data definitions for all variables are given in Table 1. Robust standard errors are reported in parentheses. *, **, *** indicate statistical significance at the 10%, 5%, and 1% levels, respectively. All specifications include individual, municipality, and year fixed effects.
The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged and do not reflect management or trading fees, and one cannot invest directly in an index.
Abstract
We study the influence of retirement on individual investors’ trading behavior. Utilizing detailed
wealth data from the Swedish Tax Agency, we focus on trading activity and portfolio returns in
the years surrounding retirement. Our results indicate that investors significantly increase their
trading frequency and hold more stocks in their portfolios after retirement. However, this
heightened activity leads to lower risk-adjusted returns of their portfolios. Overall, our findings
suggest that time constraints are a critical barrier to information processing for retail investors.
Increased leisure time post-retirement reduces this barrier, stimulating more active trading, yet
simultaneously introduces potential inefficiencies in trading decisions.
About the Author: Elisabetta Basilico, PhD, CFA
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Important Disclosures
For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).
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