The hidden cost of trading in retirement

For most of their working lives, investors tell themselves they'd manage their money better if only they had more time. Retirement finally delivers that time. But new research suggests that trading in retirement tends to increase, and that the extra activity quietly makes things worse, not better.

Most of us spend our working lives meaning to pay more attention to our finances. There's always something more pressing. The job, the commute, the kids, the weekends that somehow disappear. Sorting out the portfolio gets pushed to the weekend, then to the new year, then to "when things calm down a bit."

Retirement is when things calm down a bit.

And it's not just the investment portfolio that finally gets attention. Think about all those home improvement projects that spent years on the list. The decking that needed replacing. The bathroom you always meant to renovate. The rewiring you kept putting off. Suddenly you have the time, the inclination, and no excuse not to crack on. So you do.

Many people approach their investments the same way. After decades of feeling like an absent landlord of their own financial life, they finally have the hours to engage properly. To follow the markets, research companies, manage the portfolio with the care and attention they always intended to give it.

It feels like the right thing to do. More time, more focus, more involvement. Surely that has to mean better results.

It's a reasonable assumption. It's also, the evidence suggests, wrong.

"The more actively people traded, the worse they did relative to standard benchmarks."

What the research shows about trading in retirement

The assumption that more time leads to better investment outcomes feels almost logical. So it's worth paying attention to a study that tests it directly.

In a 2025 working paper, Ebrahim Bazrafshan and Oscar Stålnacke of Umeå University tracked the investment behaviour of 59,105 Swedish investors from two years before retirement to two years after. Using detailed wealth data from the Swedish Tax Agency, they observed what changed when people stopped working and gained free time. The paper hasn't yet been peer reviewed, and the underlying data covers 1999 to 2007, so it's worth bearing those limits in mind. But the dataset is unusually large and detailed, and the findings are hard to ignore.

After retirement, investors traded more. Annual trading frequency rose by approximately 7.7%, and the number of stocks held in portfolios increased by around 8.2%. Both are exactly what you'd expect when time pressure lifts: more attention, more decisions, more active engagement.

The problem is what happened to returns. Risk-adjusted performance fell. The researchers measured portfolio performance using Carhart alpha, which adjusts returns for market exposure and known risk factors. After retirement, this measure deteriorated by approximately 0.6 percentage points for stock-only portfolios, and by around 0.54 percentage points for combined stock and mutual fund portfolios. The more actively people traded, the worse they did relative to standard benchmarks.

The authors describe time constraints as "a critical barrier to information processing", but their findings suggest that removing that barrier doesn't improve decision quality. It increases the number of decisions made.

More activity. Worse outcomes.

Why free time doesn't make you a better investor

Understanding why this happens means looking at what time pressure does to an investor, and what lifting it can trigger.

During working life, the opportunity cost of monitoring markets is high. You don't have the hours to react to every piece of news, every price movement, every tip you read over lunch. That constraint is frustrating. But it also acts as a brake. Many of the trades people don't make because they're busy are trades they'd have been better off not making.

Remove the constraint, and the brake goes with it. That's at the heart of why trading in retirement produces worse outcomes, not better.

"Many of the trades people don't make because they're busy are trades they'd have been better off not making."

There's also something more personal at work. For many people, retiring means leaving behind not just a salary but a structure, a sense of purpose, status and daily stimulation that work provided. Markets can fill some of that gap. Following stocks, researching companies, making portfolio changes: these feel productive.

Research by Grinblatt and Keloharju (2009) found that sensation-seeking investors traded significantly more frequently than their peers, and with worse results. The researchers measured sensation-seeking partly by whether someone had a record of speeding violations. The market, for some investors, is partly entertainment. That's not a moral failing. But it does help explain a pattern that pure economics can't.

Then there's overconfidence. The more time you spend watching markets, the more you tend to trust your own judgement about them. That confidence isn't always matched by skill.

Back to the DIY analogy: clearing your schedule doesn't make you a qualified electrician. The tools are the same. The knowledge gap isn't.

How pension freedoms raised the stakes for UK savers

For UK readers, there's a policy dimension that makes this more relevant still.

Before 2015, most people retiring with a defined contribution pension did the same thing: they bought an annuity. It wasn't always the best outcome, but it meant handing the ongoing investment decisions to someone else. Once you'd converted your pot into a guaranteed income, there wasn't much left to tinker with.

The pension freedoms reforms changed that. From April 2015, retirees could keep their pension invested and draw from it as they chose, without any obligation to buy an annuity. Drawdown, which had previously been a product for wealthier retirees working with advisers, became accessible to everyone.

More control is not, in principle, a bad thing. But the shift meant that far more people were now managing their own invested portfolios through retirement, often without professional guidance. The Financial Conduct Authority found that the proportion of drawdown purchased without financial advice rose from around 5% before the reforms to approximately 30% afterwards.

Trading in retirement was always a risk for self-directed investors. The pension freedoms made it a risk for millions more.

The quiet cost of trading in retirement

There's a broader question worth asking: how much does poor investment timing already cost retail investors, before retirement enters the picture?

A working paper by Andrew Clare and Nick Motson of Cass (now Bayes) Business School looked at exactly that. Analysing UK mutual fund data from 1992 to 2009, they calculated the gap between what retail investors earned and what they would have earned by buying and holding the same funds. The average retail investor in UK equity funds lost approximately 1.17% per year to poor timing decisions, consistently buying after markets had risen and selling after they'd fallen. Institutional investors lost only around 0.27% over the same period.

That difference matters. Over 18 years, the retail shortfall compounds to roughly 20% less terminal wealth than a passive, do-nothing approach would have delivered.

The paper is now more than 15 years old, and its data ends in 2009. But the behavioural pattern it documents is consistent with evidence from other markets and other time periods: buying high, selling low, chasing past performance. There's no particular reason to think UK retail investors have become dramatically better at timing since then.

Which brings us back to trading in retirement. Clare and Motson describe the average retail investor during their normal investing life. The Swedish research shows retirement makes them trade more. If poor timing already costs over 1% a year when investors are relatively inactive, trading more often can only make that number larger.

The costs are quiet. They don't show up as a single bad decision. They accumulate slowly, year by year, in the gap between what investors earn and what they could have earned by doing rather less.

The time was never the problem

"Retirement is a gift. It just turns out the best thing you can do with it, financially speaking, is rather less than you imagined."

Remember the decking. The bathroom. All those projects that spent years on the list because there was never quite enough time.

But think about why those projects really didn't get done. Most of them stayed on the list because they were complicated, expensive, and easier to leave to someone who knew what they were doing. More time in retirement didn't change that. It just removed the excuse.

Something similar seems to be true of investing. For years, the story many of us told ourselves was that we'd manage our money better if only we had the hours to do it properly.

The evidence suggests that story was flattering but wrong. The investors who tend to do best aren't the most attentive or the most active. They're the ones who set up a sensible, low-cost approach and then resist the urge to interfere with it.

Retirement is a gift. It just turns out the best thing you can do with it, financially speaking, is rather less than you imagined.

Resources

Bazrafshan, E. & Stålnacke, O. (2025). The role of time availability in retail trading behavior: evidence from retired investors. SSRN Working Paper 5405519.

Clare, A. & Motson, N. (2010). Do UK retail investors buy at the top and sell at the bottom? Centre for Asset Management Research, Cass Business School.

Grinblatt, M. & Keloharju, M. (2009). Sensation seeking, overconfidence, and trading activity. Journal of Finance, 64(2), 549–578.

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