Baby Boomers effect on the Market?

[Snort and Squeal]

The baby boomer generation, or more so the fact that they are starting to retire, facinates me.  What effect will they have on the stock market?  Boomers seem to have a pretty good chunk of their retirement in the market so as time goes on, will the money they pull out for living expenses have an effect on the market?

[SultanofSwine]

Massive amounts of money is going to be in transition over the next several years. Will it pull out of the market...most probably won't and in a lot of cases shouldnt. The health of the market and economy is going to have a pretty significant impact on that. I think you will see a lot of money moving to annuities because people are concerned about thier retirement assets being exposed to cycles like we are in now.

With people living much longer and with the virtual non-exisitence of pensions, maintaining some level of growth exposure is going to be important to a lot of peoples ability to maintain the standard of living they desire. This is a change from the philosophies of past advisors and these retirees parents where the norm was to move to a much more conservative position.

Then there is the issue of long term care. Because people are living much longer, this risk continues to increase. Most people look at LTC insurance as a policy to take care of the cost of a nursing home. While the policy will certainly do that,imo, it's function is much more important. It is asset protection for the highest risk we face other than death to my knowledge. The govt has already pushed the look back period for asset transfer to 5 years and from what I am hearing there will be a continued effort to move it to 7 or possibly 10.

The boomer generation is estimated to be somewhere between 72-78 million folks depending on who's numbers you look at. Considering there are only approx. 7-8 million LTC owners nationwide, this country is facing a serious crisis in taking care of its aging population. More importantly, a great pct of that population has the entirety of thier retirement assets at risk.

So without the certainty of a pension, a greater likelihood of needing some level of long term care, market turmoil and a sagging economy, boomers are in an uncomfortable position about where and how best to move foward. And that is without mentioning taxation issues as they impact distribution planning or tax code changes that may affect them post election or the estate tax issues pending resolution and whether or not they may leave thier heirs an estate tax burden.

[Snort and Squeal]

Massive amounts of money is going to be in transition over the next several years. Will it pull out of the market...most probably won't and in a lot of cases shouldnt. The health of the market and economy is going to have a pretty significant impact on that. I think you will see a lot of money moving to annuities because people are concerned about thier retirement assets being exposed to cycles like we are in now.

With people living much longer and with the virtual non-exisitence of pensions, maintaining some level of growth exposure is going to be important to a lot of peoples ability to maintain the standard of living they desire. This is a change from the philosophies of past advisors and these retirees parents where the norm was to move to a much more conservative position.

Then there is the issue of long term care. Because people are living much longer, this risk continues to increase. Most people look at LTC insurance as a policy to take care of the cost of a nursing home. While the policy will certainly do that,imo, it's function is much more important. It is asset protection for the highest risk we face other than death to my knowledge. The govt has already pushed the look back period for asset transfer to 5 years and from what I am hearing there will be a continued effort to move it to 7 or possibly 10.

The boomer generation is estimated to be somewhere between 72-78 million folks depending on who's numbers you look at. Considering there are only approx. 7-8 million LTC owners nationwide, this country is facing a serious crisis in taking care of its aging population. More importantly, a great pct of that population has the entirety of thier retirement assets at risk.

So without the certainty of a pension, a greater likelihood of needing some level of long term care, market turmoil and a sagging economy, boomers are in an uncomfortable position about where and how best to move foward. And that is without mentioning taxation issues as they impact distribution planning or tax code changes that may affect them post election or the estate tax issues pending resolution and whether or not they may leave thier heirs an estate tax burden.

Great post.  The Baby Boomers and the affect they will have on everything truly fasinates me.  Stock market, health care, real estate markets, tee times.... there are so many things that will be affected by them in the coming years.

[SultanofSwine]

The housing issue is a curious one to me as well. The obvious expectation would be that a fairly significant number will be looking to downsize. Until there is positive change in the housing market, I tend to think most will delay that move as there are likely many who have planned to use the remaining profits from the sell/buy transaction to supplement annual income. The other impact is that once that trend commences in earnest, how much impact will it have on new home sales?

Another area I think will be interesting to watch is the reverse mortgage industry, esp on the heels of the subprime mess. A lot of boomers have not adequately saved for the retirement they expect and will be looking to thier home value to help. Where will this industry be in say 10 years?

Pharma companies, one would think, could be expecting a fairly substantial and sustained growth period as well. There already seems to be a growing trend of medical practices moving away from providing care to medicare patients and some that no longer except certain health insurance providers. How does that impact not only boomers retirement health care cost and availability but also what is the trickle down impact to non-boomers?

Interesting times ahead that is for sure.

[Masshog]

Demographically speaking the US and most of the developed world is a train wreck. Here is a link to Larry Kotlkoffs demographic work.  I heard him speak at a Barclays inflation conference three years ago and was so impressed that I arranged for him to come speak at our Boston Fixed Income Society luncheon.   I do have some concerns in terms of some of the straight line extrapolations he makes... but in general... it is very very compelling work.

One of the big reasons that we should all be working hard to find some reasonable answers to immigration, SS and Medicare.   

[SultanofSwine]

Link?

[Masshog]

Sorry, I can't find the original link but here is a link to his bio and lots of his articles.  I will look around this weekend and see if I can find the one I meant to post. 

http://people.bu.edu/kotlikoff/