Who is going to buy all the equities when the baby boomers retire en masse?

Question

As they start cashing in their 401k's is the market going to crash? Or will there be sufficiently sustainable demand for equities?

Answer 1

Well, look at the market today. The largest buyers of equities are companies that issued them. Interest rates are still low, so companies borrow to buy stock back... Expect more of the same as baby boomers retire. Retirees will want to move their money from stocks to bonds; companies will respond by selling them bonds and using the proceeds to buy back stock...

Answer 2

The big problem for the government is the medicare and social security money has been spent already. When the boomers retire, an estimated $32 trillion or will have to directly come out of the budget (where they have IOUs for both social secuity and Medicare).

Also most boomers have very little in the stock market retirement funds. The average at 65 is a shocking $65,000 on average in their 401Ks. Many plan on not retireing (I wonder why).

There is also the labeled Generation X which is supposably larger in number than the baby boomers. They are in or just getting out of college. They will be buyers while the boomers sell.

Answer 3

An interesting question that requires some thought. One of your responders mentioned the Chinese buying up the assets. A distinct possibility. At the moment they are buying U S government debt. They might eventually become tired of that and switch to real assets.

A lot of those baby boomers poured a lot of their dinero into the dot.com craze of the 90's so they do not have all that much any longer. Then of course there are those that decided to invest in a vacation home. When the realestate marker for such things crumbles, they will not have so many assets either.

Then there is always the possibility of the economy and the stock market taking dive in the near future. That would also have a detrimental effect on the 401k's. Heck. Maybe the baby boomers will not be able to retire.

Answer 4

This is a major concern, not only for when baby boomers retire but when they hit the 70 years old as they will be forced to withdraw 4% of their account annually per the current IRS regulations. Unless the IRS laws change to somehow encourage greater investment or reducing the need for the boomers to sell we could see the greatest stock market decline ever in our history.

There are many things that can happen to prevent this future, the rest of the world including Brazil, India, Russia and China can make up for the boomers selling although with the huge US debt and the weakening US dollar this is unlikely. I won't go into some of the other potential solutions but there are several and we aren't due to hit this issue for about 10 years so anything can happen. The key is keep an eye on it. I'd also recommend keeping 10%-20% of your portfolio in precious metals such as gold and silver "as insurance" as this can balance out a stock market crash if one were to occur

Answer 5

Baby Boomers are not going to sell equities enmass as they retire and the market is not going to crash. Many Boomers are retiring now, in the mid-fifties onward. Most of the Boomers money is already out of equities as a result of asset allocation. Most of their money is already in fixed income producing investments, bonds, money markets and CD's. Not all will practice efficient assat allocation, but on the whole most do. Much of that money will also be inherited. Some will be spent and some reinvested into equities. According to AMG Data Services $112 billion went into taxable mutual funds in the first two quarters of this year, and its not coming right back out soon. A market crash as a result of Baby Boomers retiring is nothing more than some people trying to draw attention and another urban legend going around the internet.

Answer 6

The predictions for a market crash when baby boomers retire are way overblown. First of all, they aren't going to sell everything en masse, as the previous respondent pointed out. Baby boomers like to hoard as well as spend. Second, there are plenty of buyers for any kind of worthwhile company stock. Baby boomers are hardly the only demographic with $$ to invest.

Answer 7

Not all would cash them.... many will be inherited. The baby boomers may have been a bit uppity about themselves but they had plenty of progenies to jump-start as well.

Answer 8

As with most questions about the economy, you can find respected authorities on both sides of this question. If economics were a science, I suppose we would all be wealthy.

Answer 9

GOOD QUESTION BUT THE STOCK MARKET WILL SURVIVE WHEN WE RETIRE JUST AS IT DID WHEN OUR PARENTS RETIRED AND SOLD THEIR STUFF OFF . THE REAL ESTATE MARKET THOUGH MAY GET CLOBBERED CAUSE THERE WILL NOT ONLY BE PRIMARY RESIDENCES SELLING BUT OUR SECOND HOMES AND VACATION CONDOS TOO . i WILL NOT BE AROUND BUT IT WILL BE INTERESTING TO SEE .

Answer 10

The Chinese will buy everything. Seriously. They are the new Japanese who bought stuff in the 70s.