Will Retiring Baby Boomers Tank the Stock Market?

January 24th, 2008  |  Published in Retirement

That’s the question that’s been on the minds of many lately, ever since Kathleen Casey-Kirschling, the first baby boomer; became eligible for Social Security earlier this year. The idea behind the question is that when retiree Baby Boomers begin withdrawing funds from their retirement accounts, the funds will begin selling assets to pay out the retirees. The selling of assets will generally be stocks (or the retirement accounts themselves will be liquidated of stocks), which will result in catastrophic losses for the stock market. Jeremy Siegel, a professor at Wharton, has a computer model that anticipates a 40-50% drop in stock prices, unless overseas investment comes to the rescue.

So, should we panic? Not yet, according to the experts, because this deluge won’t be for another 10 years. Also, they also assume that the liquidation of assets will occur more slowly than the accumulation of assets; something that makes sense to me from a common sense perspective anyway. Here’s another reason not to panic – international investment. If boomers liquidate their assets, there will be plenty of investors abroad that will be willing to buy the stuff boomers don’t want. Now, whether this becomes reality is another thing but there are a lot of countries out there investing in US companies now that the dollar is cheap and our economy looks fragile.

You can read more on this at Yahoo Finance.

  

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