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Stocks May Be Unscathed by Baby Boomer Retirees

The retirement of the baby-boom generation should not be a drag on stock prices, according to an analysis by Vanguard.

Vanguard researchers cited three key reasons why aging baby boomers won’t adversely affect the stock market. First, the baby-boom generation spans 19 years (birth dates of 1946 through 1964). Second, international ownership of U.S. stocks has been increasing. Third, historical data does not show a significant relationship between age and equity returns.

Though baby boomers are often grouped together, they will enter retirement over a prolonged period. The first baby boomers turned 65 in 2011 and the last won’t turn 65 until 2029. The length of the time-span implies any impact of their retirement on stock prices should occur gradually.

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Discussion

Larry Keefe from New York posted 4 months ago:

Another aspect of this issue--which is often ignored in these discussions of asset allocation during retirement--is that a person retiring at 65 should still consider themselves a long term investor, i.e., one with a horizon of 10+ years. Actuarial tables indicate that boomers will generally have 20 or more years to live, and they probably should plan for at least 30. That means it's not likely that on their 65th birthday they're going to dump all their equities in one fell swoop, pay a huge capital gains tax, and convert everything to an annuity where they pay huge fees and face large inflation risks. People who have accumulated large enough holdings in equities to pose a threat to the market are in most cases intelligent investors, and that kind of strategy would be--to say the least--less than prudent.


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