Will Retiring Baby Boomers Push Market Values Down
As They Start Taking Money Out?
Retirement planning expert Russell Jalbert opines about whether the influx of retiring baby boomers will depress market prices. Jalbert offers these observations:
Economists are citing six reasons why this is nothing more than a myth.
I'm sure you've heard this one when talking to your friends:
"As baby boomers retire, they will begin taking money out of the market in order to fund their retirement income needs. This will create a large supply of "sellers" which will, in turn, push market prices down in order to find enough "buyers." Since baby boomers make up a large percentage of our country's population, this sell-off will push down stock prices for many years to come."
On the surface, this argument makes a lot of sense. However, economists don't necessarily agree with it.
Jalbert lists six different reasons that economists cite as to why it's just not true:
Cautious retirees: Most retirees have historically been wary about selling assets because they might need that money if they live longer than expected.
Bequests: Not all seniors want to spend every dime they have accumulated.
Uneven wealth distribution: About one-third of U.S. financial assets are held by the wealthiest 1 percent of the population, according to the CBO. The wealthiest Americans won't need to dip into their savings to pay for their golden years.
Working longer: Baby boomers who have seen their retirement savings decline significantly over the past year may decide to delay retirement.
Similar portfolios: Most people do not currently change the asset allocation of their portfolios upon retirement, CBO says.
Foreign demand: Even if older Americans sell off their assets to finance retirement, the CBO expects an increase in foreign demand for U.S. assets primarily from investors in developing nations with emerging economies and relatively young populations.