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boomers cashing out
Old 05-07-2008, 12:11 PM   #1
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boomers cashing out

hi,

I just started reading How to Retire Early and Live Well with Less Than a Million Dollars by Gillette Edmunds. One of the things he mentioned is that when the boomers start cashing out their investments from stocks/MF (I think he said around the year 2015), we'll see a major decline in the market (or something in that nature).

What is your opinion on that? This topic might have come up before, my apology if it has.
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Old 05-07-2008, 12:27 PM   #2
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Don't remember the source, but I read that just the opposite might happen: all the money being released from pensions, 401Ks etc. might drive up the price of many stocks.

Bottom line: no one has a clue.
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Old 05-07-2008, 12:29 PM   #3
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I have heard the explanation that it wont make a difference...people that have been investing in stocks will not suddenly shift allocation to no stocks since they will be taking out money over years and need the growth to last for years in retirement...
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Old 05-07-2008, 12:33 PM   #4
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Since boomers know it's probably inflation suicide to get rid of ALL their equities, I suspect it will NOT have the effect the doomsayers say it will. I mean, are you FIRED folks running 100% fixed income portfolios right now? Didn' t think so........
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Old 05-07-2008, 12:35 PM   #5
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Yeah, we are talking about the "educated" ones right....the rest probably went into fixed income in Jan.
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Old 05-07-2008, 12:38 PM   #6
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Yeah, we are talking about the "educated" ones right....the rest probably went into fixed income in Jan.
My portfolio has recovered to where I am up 1.5% YTD, so I guess the bear market is history...........
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Old 05-07-2008, 12:43 PM   #7
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It has been shown than most stocks are held by wealthy people who don't need to cash in their investments all at once (or at all) to fund their retirement. And government studies have shown than the typical boomer has only about $50K saved up for retirement and I am sure not all of it is invested in equities... So I don't think it will have much of an impact at all. Some people also say that MacMansions will see their price collapse when boomers retire and downsize to smaller dwellings...
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Old 05-07-2008, 01:11 PM   #8
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.... And government studies have shown than the typical boomer has only about $50K saved up for retirement and I am sure not all of it is invested in equities....
FIREdreamer, it blows my mind to think I might be an unusual boomer, considering I've never made an impressive salary.
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Old 05-07-2008, 01:19 PM   #9
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FIREdreamer, it blows my mind to think I might be an unusual boomer, considering I've never made an impressive salary.
As for other things in life, when it comes to your salary it's not the size that matters, it's what you do with it... . You are an unusual boomer in that you decided to save a good chunk of your income when other people were spending theirs liberally.
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Old 05-07-2008, 01:40 PM   #10
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As for other things in life, when it comes to your salary it's not the size that matters, it's what you do with it... . ....
That's one of the reasons I post here, to say, yes you can!
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Old 05-07-2008, 02:45 PM   #11
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My portfolio has recovered to where I am up 1.5% YTD, so I guess the bear market is history...........
wait until the end of the day and see if this is still true ...
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Old 05-07-2008, 05:21 PM   #12
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thanks for everyone's feedback. It's nice to be able to get 2nd opinions on this forum so I don't fall in the doomsayer's realm.
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Old 05-07-2008, 05:26 PM   #13
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My portfolio has recovered to where I am up 1.5% YTD, so I guess the bear market is history...........
Check it tomorrow and get back to us with a report.
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Old 05-07-2008, 06:11 PM   #14
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80% of the markets are really owned by 20% of the wealthiest people,.... they aint selling to pay their rent.
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Old 05-07-2008, 08:01 PM   #15
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80% of the markets are really owned by 20% of the wealthiest people,.... they aint selling to pay their rent.
Not to mention the huge percentage of the market in institutional investments...Bernstein gave a number I can't remember right now, but I'm pretty sure it was over half.
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Old 05-07-2008, 08:58 PM   #16
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Not to mention the huge percentage of the market in institutional investments...Bernstein gave a number I can't remember right now, but I'm pretty sure it was over half.
Of course most of these institutions are essentially middlemen for individuals, either through mutual funds and ETFs or through pension plans. The needs of the true beneficial owners (the individuals) will necessarily be reflected over time in the behavior of their asset managers.

Count me as one who thinks there will be a negative effect on prices of existing securities, as relatively more stock will be offered, and less demanded.

You don't buy food or pay medical bills with stock, you pay with cash.

Furthermore, price effects happen at the margin. I cannot fathom how the effect could be positive, as one poster above reported reading. I think the equity managers want our money to stay put and allow them to skim those luscious management fees. So they will say whatver they think might help toward this goal.

Ha
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Old 05-07-2008, 09:22 PM   #17
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I think ha makes sense.

Going a little further, all retirees are expecting "somebody else" to do all the work to produce the goods that we plan to consume. If the retirees/workers ratio goes up, we'll have a harder time getting those goods. This is pretty clear if you look at a simple pay-go system like social security. It's pretty muddy when you look at private investments.

I don't expect any huge impact, but I count this as one reason why the average return on capital over the next 40 years could be a little less than it was over the last 40. This could impact the date I retire a little, but not my asset allocation.
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Old 05-07-2008, 10:23 PM   #18
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I imagine the average person will not be able to make it through retirement without touching at least some of the capital--so if that capital is in equities, they will be sold. But maybe bought by the boomer's children....
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Old 05-08-2008, 02:56 AM   #19
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I don't think boomers will rush to cash out. Some who experience health problems may be forced to liquidate...

I think the rush to cash out will be when boomers less conservative (spend-thrift) children inherit the money... Many will want to take the windfall and blow it.
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Old 05-08-2008, 03:17 AM   #20
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world wealth is growing faster than the withdrawls will happen. all this new emerging market wealth will need a home too.
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