Boomers Go: Will the Markets Follow?
Retiring baby boomers could pressure markets, according to the
Christian Science Monitor:
The first boomers turn 59½ this year. That's old enough to pull money out of Individual Retirement Accounts without tax penalty. And while no one expects a huge drawdown immediately, some financial analysts are concerned about what boomer retirement will do to the stock market. Call it the cash-in crisis of the early 21st century...markets could tumble, some experts say. Others counter that the threat is overblown because markets are far too complex to judge using generational shifts alone.
Further cause of worry is this--in just three more years, the first boomers will be eligible for early Social Security payments. There's also a strong tendency for people to take lump-sum distributions from
IRAs and
pension plans at age 62, experts agree. Although this argument is a common one, things are a bit more drastic this time around for the simple fact that it's
50 percent larger than the previous generation and one-seventh bigger than the following one. By 2030, when all boomers will have reached retirement age, the share of Americans over 65 is predicted to jump from 17 percent in 2000 to 27 percent. Since the 1920s, stocks have returned each year an average 6 percent above bond yields, but if money gets pulled out of
401ks and their ilk--watch out! You could see a nasty and seismic shift into bonds. The only thing that could hold this tsunmai wave back is a sudden but necessary decision from boomers to continue working to age 70. I could see that happening if a wave of inflation rushes by. That would present advisors and brokers a terrific opportunity to present clients with more conservative retirement vehicles, like
fixed annuities--which keep pace with inflation without the attending risk associated with equities. We'll talk more about annuities tomorrow...
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