Early middle age, it seems, is the new winter of our discontent.High quality global journalism requires investment. Some research from the US, where similar patterns of savings emerge, may help to understand that loss aversion. Writing in a recent publication of the Federal Reserve Bank of Cleveland, LaVaughan Henry suggests that the wealth-to-income ratio is a good measure of households’ preparedness for retirement. Using flow of funds data, Mr Henry points out that for Americans aged 45-54, that ratio in 2010 was slightly higher than in 1983 – but far lower than in 2007, immediately before the crash. Today’s 45 to 54-year-old Americans have recent, and vivid, experience of a loss of wealth that is likely to have a big impact on their willingness to take risk.
That, Barclays’ Mr Davies said, could account for the bias towards cash. “The events that hit that cohort can be long lasting. It may cause people to stay away from asset classes they perceive as risky for the rest of their lives.”