When it comes time to sell stocks, who will buy?
February 4th, 2007Boomers have been an important drivers of the stock market for several decades. The arrival of IRAs and 401 (k) accounts collided nicely with Boomers’ need to start socking away money for retirement back in the 1980s…and the rest is market history.
The question now: what happens when Boomers start selling off their portfolios to fund retirement? The numerically-smaller generations of Americans that follow aren’t large enough to buy all that stock Boomers will be selling. Will boomer selling generate bigtime downward pressure on the markets>
Market experts have had a healthy debate going on this for a while. The latest installment is in today’s Washington Post, where writer Martha Hamilton interviews Robert T. Kiyosaki, author of the 2002 book Rich Dad’s Prophecy:
Kiyosaki noted that the laws that created Individual Retirement Accounts and 401(k) plans require people to start taking withdrawals from these tax-favored accounts at age 70 1/2 , which is in 2016 for the leading edge of the baby boom. He predicted that dynamic combined with “millions of baby boomers needing money for medical expenses” could create a sell-off.
Kiyosaki said he is still worried about such a prospect today, but he lists it as only as one of many ills that he thinks could undermine financial markets. . .
Wharton School of Economics Professor Jeremy J. Siegel has argued that the selloff phenomenon could spell disaster unless boomers sell their assets to investors from burgeoning economies such as India and China.
If you want to dig really deep into the topic, check out the U.S. Government Accountability Office’s 70-page report. GAO concludes there’s not much to worry about here; most retirees are spending down their assets at a modest rate. And, since boomers will retire over a 20-year span, the impact won’t be felt as a single shock wave.
