You can almost hear the lip smacking across the land. Boomers are back in the news as respected news outlets wonder if the net effect of 79 million baby boomers will bring the stock market down with their retirement goals.
While 79 million Boomers sounds like a lot, they won’t be heading for the exits en masse. In fact, the perceived floodgates will find more than a trickle heading for retirement but certainly not the flood you think. And the negative effect on the markets will be offset by two things: the replacement worker entering the workforce and the need to keep their money working long after they may have left their jobs.
The jobs that Boomers currently occupy will not go away due to attrition. And when the new worker enters the job market, they will begin to purchase stocks as part of their own retirement plan, keeping the system robust for years to come. The only problem that these new workers face is their own estimations of how much they will need to invest.
Boomers can be broken down into three groups: those that used their 401(k)s, IRAs and all of the investment tools available throughout their careers (the smallest group), those that are real estate rich and cash poor and only dabbled in the investment tools at their disposal (the next smallest group) and the last group are those that are underinvested, overexposed to debt and who will rely on Social Security to make up any shortfall (the majority). This last group will try to continue working but many won’t be able to – but they aren’t the sort of people that end up in an investment professional’s office for advice.
The Boomer theory of impending market disaster is over-exaggerated. The short-term performance of the markets is not. Will this keep Boomers from retiring? Probably. Will the concept of what retirement is change as a result? Absolutely.
Fear mongering and second guessing are the new products and strategy that investment pros are using, forcing people to wonder if they made the right choices. If your investment professional is advocating a change in how the game is being played in the final seconds, you should rethink your coach. What kind of a coach tells their team to go defensive when the scoreboard suggests they are behind?
If Boomers were smart and I think they are much smarter than they are given credit as being, they would realize that diversified involvement will keep them viable. But hearing investment pros utter “tsk, tsk” as they look over a lifetime of investment moves will ensure they will have a nice retirement!
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