Oct 4, 2006

On Baby Boomers, Gen-Xers, and Equity Markets

I am among the segment of the American population who is technically a part of the post-World War II baby boom, but who also qualifies as a denizen of Generation X (we will ignore, for the sake of simplicity, any references to such subsets as Baby Busters and Generation Jones, or the period known as the Consciousness Revolution).

I occasionally think about what my retirement years might look like, and I must admit that I am not optimistic. Most of us agree that Social Security will not provide much in the way of retirement income in the next few decades, and we have been taught that 401-K and other investment vehicles are critical for maintaining a comfortable retirement income.

But what happens when all of the Baby Boomers begin to remove money from the equities markets?

The Wall Street crowd tells us not to worry about such things, as there will always be buyers for every seller, ceteris paribus.

My gut tells me differently. I believe that there will be major sell-offs in the 2020s that will erode the value of stocks and bonds, and that retirees (and would-be retirees) will see trillions of dollars in value disappear.

The Baby Boom generation has a demographic edge numbering in the tens of millions, and as a group Boomers are living longer. I suspect that medical advances will likely push life expectancy for Boomers into their 80s, meaning that more retirees will live longer on their savings.

And draw even more money out of the markets.

Will there be enough world investors to pick up the investment slack so that I can retire at age 70? I am assuming that the retirement age will have to be gradually raised to accommodate changes in longevity. I remain skeptical of this optimistic scenario, and believe that I will be working until I am 80 in order to avoid impoverishment.

For the moment I will continue to follow the conventional investment wisdom, but I cannot help but wonder if the equities markets are doomed to implode from an overabundance of investors trying to cash out in order to eat and pay their mortgages.


Anonymous said...

You have asked the million dollar question Mike. The 401k's are just a Ponzi sheme.

Hooda Thunkit said...


As I now understand it, the objective is to retire with your house and all major bills paid off, relieving the heavy burden from your retirement finances.

And, the sooner that you can become debt free, the sooner you can invest for your retirement.

Most people never get past the debt free part, much like our government, so the biggest threat to our generation's retirement is our heirs refusing to pay for our debt, which they shouldn't have to, if we had just a little self restraint.

I've done my part, except for paying off my portion/burden of debt from my parent's generation, so they can steal the rest of my social insecurity (What they haven't already stolen/taken), and put it on my parent's generation's "tab."

Peahippo said...

The Congress has been increasing the deductions for Social Security for many years, as well as increasing the high-end cutoff wage it applies to. There's little danger of SS collapsing, then, since the Congress will just continue to bend over and let the then-massive elderly voting bloc demand that more be taken from the paychecks of the working class. What's REALLY in danger of collapsing is the 1970s (i.e. ideal) middle-class lifestyle.