Will the stock market crash when baby boomers take money out?
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My Boomer Tips
I read some blog post where the blogger claimed that the Dow will sink to 6,000 when baby boomers take money out of retirement accounts. Even if the removal of money from these accounts stimulates spending, can the stock market sustain high levels without the support of all those retirement accounts?
Even if the money isn't being taken out all at once, that would mean a gradual decline of the market? Most funds don't beat the S&P average (11%), so we can't assume interest will last forever and we shouldn't assume that the following generations (a smaller population) would keep the same amount of money in retirement accounts.
I think this is why alternate forms of tax deferred investment are being proposed. We already have 529 accounts for college educations that boomers can put their excess savings in for their grand children. And I suspect this is why private social security acounts are proposed, to stimulate the market for buying stock. It was boomers saving for retirement in IRSA’s and 401(k)’s that ran the market above 10,000. So yeah, I think you ask a good question.
It does not seem likely they will all take out every dime at the same time. While they are taking out others will be putting in, so I doubt the change will be very drastic
No. The bubble will burst before that.
No.
The baby-boomers would ALL have to remove ALL their money simultaneously, AND they would all have to be invested in areas where the Dow-Jones INDUSTRIAL Average would be invested (as opposed to technology).
Plus, we you’re assuming that the baby-boomers have sufficient holdings to effect the market – this may or may not be true. In any case, as long as values remain high, the institutions will most likely pick up the shares of stock at the cheaper prices and restore at least some consumer confidence. That’s what happened after 9-11 – people saw that the stock-market was decimated, BUT Microsoft was still good – their business was unaffected, but there was a huge buying opportunity, and those who are holding long term (more than one year) can wait – those who did made out big.
So, no.
The "Stock Market" is not the DJIA (Dow Jones Industrial Average), or the Nasdaq (National Association of Securities Dealers Automated Quotations – which deals mainly with tech. which is not the on NYSE, AMEX, or regional exchanges), the stock market is ALL stocks, and the options on those stocks – both corporate options and stock options the public can purchase, although the above is what moves the indexes most.
That is very doubtful. Boomers will be using their retirement savings over decades, not all at once. And successor generations are increasingly investing in their retirement plans.
No.
Baby boomers are not going to take out their ALL their money AT THE SAME TIME.
Example:
You are now 70 and retired with $700,000.00 USD and you don’t smoke and you are healthy and you are likely to live up to 90
Any decent mutual fund will return at least $70,000.00 USD annually for the rest of your life and you will inherit that money to your children and grandchildren.
In other words, you take out only the interest and NEVER the principal.