Author Topic: The Boomer "Crash?"  (Read 37916 times)

Cyaphas

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The Boomer "Crash?"
« on: April 04, 2016, 02:07:26 AM »
Something I've discussed a few times with some very financial savvy friend of mine is the forced distributions of Boomers retiring and it's effect on the stock market.

A good read for anyone else interested in this topic:

http://www.marketwatch.com/story/rich-dad-author-says-the-market-collapse-he-foresaw-in-2002-is-coming-2016-03-23?link=TDheadline_4


marty998

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Re: The Boomer "Crash?"
« Reply #1 on: April 04, 2016, 04:07:16 AM »
I wonder how applicable that really is...

In Australia anyway, most Boomers haven't saved substantial sums, because they did not get the benefit of 40 years of superannuation contributions.

The younger generations are going to be adding substantially more to retirement investments than the oldies will be taking out.

And remember that stock markets have investors from all over the world... the entire market is not only comprised of north american boomers.

Cyaphas

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Re: The Boomer "Crash?"
« Reply #2 on: April 04, 2016, 04:36:59 AM »

And remember that stock markets have investors from all over the world... the entire market is not only comprised of north american boomers.


I could see US real estate markets being heavily effected. The Boomers don't give up on their current homes before the Millennials are forced to buy. It would create a low supply environment that quickly shifts to a high supply environment in a ten year window.

arebelspy

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Re: The Boomer "Crash?"
« Reply #3 on: April 04, 2016, 05:33:56 AM »
We've discussed this idea before.

The biggest reason why I think it's silly (among many reasons) is that the boomers aren't all suddenly magically pulling all their money at once.  The generation spans 20+ years, and will keep what money they have invested until they need it.  Why would a non-homogeneous group all at once sell all of their funds?  It doesn't make any sense.

The best case I think you could make would be a long, steady decline as boomers age and pull out more than they put in.  That makes way more sense than a crash.  But, guess what?  Millennials outnumber boomers! (83.1MM vs 75.4MM)

https://www.census.gov/newsroom/press-releases/2015/cb15-113.html

So if you buy into Kiyosaki's "Demographics are Destiny" catchphrase, you should think the market will be going UP, as a greater number of millennials invest than the number of boomers withdraw.

In short, it's basically bunk, and not something to worry about, at all.

Will we have a crash?  Certainly, at some point.  That's how cyclical markets work.

Will it be due to this reason?  No, almost certainly not.  Can you predict when it will happen?  Again, no.

It's not something to worry about, or buy into.
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Jack

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Re: The Boomer "Crash?"
« Reply #4 on: April 04, 2016, 07:11:04 AM »
The best case I think you could make would be a long, steady decline as boomers age and pull out more than they put in.  That makes way more sense than a crash.  But, guess what?  Millennials outnumber boomers! (83.1MM vs 75.4MM)

https://www.census.gov/newsroom/press-releases/2015/cb15-113.html

So if you buy into Kiyosaki's "Demographics are Destiny" catchphrase, you should think the market will be going UP, as a greater number of millennials invest than the number of boomers withdraw.

I mostly agree,  but not entirely. Millennials aren't in their peak earning years yet; Gen X is. And Gen X is indeed smaller. For that reason, I think it's reasonable to expect perhaps a small decline in the medium term, or at least greater volatility, relative to what the market would have done had Gen X been interpolated between the Boomers and Millennials in size.

(In other words, I'm not necessarily predicting a decline expressed in actual lower valuations, just perhaps a lower growth rate than there would have otherwise been.)

Either way, I'm not worried about it -- all a medium-term decline (or slow growth) would do is make my FIRE date, which would happen sometime in the middle of it, effectively more conservative.

forummm

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Re: The Boomer "Crash?"
« Reply #5 on: April 04, 2016, 07:43:13 AM »
I don't think "Rich Dad" is the most compelling authority on just about anything. He just had some good marketing.

I also am not worried about the boomer situation. If you're a boomer and you're being forced to take an RMD you can either spend it or save it, right? You might just sell VTSAX in your IRA, take out the money, and then buy VTSAX in your taxable. No net change. Or maybe you spend the money. In which case it increases economic activity which gives people on the other end of the transaction money to invest and also increases profits for the firms (many of which are in VTSAX) so earnings rise. Sounds not too bad.

arebelspy

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Re: The Boomer "Crash?"
« Reply #6 on: April 04, 2016, 07:46:55 AM »
If you're a boomer and you're being forced to take an RMD you can either spend it or save it, right? You might just sell VTSAX in your IRA, take out the money, and then buy VTSAX in your taxable. No net change. Or maybe you spend the money. In which case it increases economic activity which gives people on the other end of the transaction money to invest and also increases profits for the firms (many of which are in VTSAX) so earnings rise. Sounds not too bad.

That's another great reason why this isn't something to worry about.  There's not really a likely situation where all this money is withdrawn, and parked in cash, for no reason.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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forummm

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Re: The Boomer "Crash?"
« Reply #7 on: April 04, 2016, 08:05:40 AM »
If you're a boomer and you're being forced to take an RMD you can either spend it or save it, right? You might just sell VTSAX in your IRA, take out the money, and then buy VTSAX in your taxable. No net change. Or maybe you spend the money. In which case it increases economic activity which gives people on the other end of the transaction money to invest and also increases profits for the firms (many of which are in VTSAX) so earnings rise. Sounds not too bad.

That's another great reason why this isn't something to worry about.  There's not really a likely situation where all this money is withdrawn, and parked in cash, for no reason.

And if they did park it in cash, someone would look at the market price for stocks and say "wow, that's cheap" and then take corresponding cash off the sidelines.

You could make an argument that retiring Boomers is a benefit to the economy. All that forced spending on medical and personal care as they age. And much of that is funded by deep pockets (like Medicare) so there will be plenty of money flying around. And when they retire from jobs it opens up opportunities for the following generations as everyone steps up the ladder. Unemployment among the young could improve a lot. On the list of things in life to worry about, this is pretty far down there.

effigy98

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Re: The Boomer "Crash?"
« Reply #8 on: April 04, 2016, 09:26:48 AM »
My guess aging baby boomers are going to have an impact on the market as they are very rich compared to millennials and they are irrational humans so the next downturn will probably pull out the money for good and move to CDs and gold. I do not think it is a crises however and eventually millennials (and immigrants) will catch up and match boomer investments if confidence remains in the market, but we are going to have some bumpy volatility for a bit.

JR

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Re: The Boomer "Crash?"
« Reply #9 on: April 04, 2016, 11:31:26 AM »
Over 40% of households ages 55-64 have $0 in retirement savings. Does the guru take this into account when making his dire prediction?
« Last Edit: April 04, 2016, 11:57:26 AM by JR »

frugledoc

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Re: The Boomer "Crash?"
« Reply #10 on: April 04, 2016, 11:43:02 AM »
If boomers all sold at once and it caused the market to tank even though company profits were unaffected then dividend yield would shoot up and there would be buyers??

forummm

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Re: The Boomer "Crash?"
« Reply #11 on: April 04, 2016, 01:12:38 PM »
Over 40% of households ages 55-64 have $0 in retirement savings. Does the guru take this into account when making his dire prediction?

Good point.

If boomers all sold at once and it caused the market to tank even though company profits were unaffected then dividend yield would shoot up and there would be buyers??

Yeah, smart people would buy stocks on sale.

Cyaphas

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Re: The Boomer "Crash?"
« Reply #12 on: April 04, 2016, 10:18:01 PM »
Over 40% of households ages 55-64 have $0 in retirement savings. Does the guru take this into account when making his dire prediction?

This number is irrelevant to the argument. When people talk about the 'wealthy' they're mostly talking about boomers.

http://www.financialsamurai.com/the-average-net-worth-by-age-for-the-upper-middle-class/

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Re: The Boomer "Crash?"
« Reply #13 on: April 05, 2016, 12:44:46 AM »
If you're going to test a theory by putting all your money behind it, it's a very high risk proposition.  If you had prior cases to test against, it might help you.  For example, what happened when Boomers had to pay college tuition for their children?  A year of college can be more expensive than a year of retirement.

I can think of several significant scenarios that don't involve selling equities in retirement.  Past generations often relied on stock dividends or earnings from bonds.  Boomers listening to their parents for retirement advice might not sell stocks, but live off the dividends instead.  What about Boomers leaving their assets to children and/or grandchildren?  They might not sell at retirement, either.

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Re: The Boomer "Crash?"
« Reply #14 on: April 05, 2016, 05:15:39 AM »
Something I've discussed a few times with some very financial savvy friend of mine is the forced distributions of Boomers retiring and it's effect on the stock market.

A good read for anyone else interested in this topic:

http://www.marketwatch.com/story/rich-dad-author-says-the-market-collapse-he-foresaw-in-2002-is-coming-2016-03-23?link=TDheadline_4

"Demography is destiny." Demographics can not be ignored or denied. This is why the author is incorrect.

MKinVA

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Re: The Boomer "Crash?"
« Reply #15 on: April 05, 2016, 05:33:03 AM »
Keep in mind that the boomers are the last generation with pensions. Many are not even in the market. It's the younger generations that have been automatically enrolled in 401k plans upon employment. 

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Re: The Boomer "Crash?"
« Reply #16 on: April 05, 2016, 10:20:44 AM »
Just to pile on to why this is wrong, it doesn't consider asset allocations. As they have approached conventional retirement age, many boomers have gradually moved a greater portion of their assets out of equities. This gradual sell-off will further diminish the impact of boomers selling equities.

Metric Mouse

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Re: The Boomer "Crash?"
« Reply #17 on: April 05, 2016, 10:28:02 AM »
Just to pile on to why this is wrong, it doesn't consider asset allocations. As they have approached conventional retirement age, many boomers have gradually moved a greater portion of their assets out of equities. This gradual sell-off will further diminish the impact of boomers selling equities.

Any efficient market theorists think that this has already been priced into the market?

Trevor Reznik

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Re: The Boomer "Crash?"
« Reply #18 on: April 05, 2016, 01:25:38 PM »
Won't it be good for the economy overall when the boomers vacate their high paying jobs and start spending their staches in the economy, freeing up those jobs for younger generations to move into?  Sure they are drawing down their investments, but they aren't hoarding the cash, they're spending it.

dougules

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Re: The Boomer "Crash?"
« Reply #19 on: April 05, 2016, 03:55:40 PM »
Bring it on!  The market is way overvalued, in the US at least.  We could use a return to sane PE ratios.  I'm tired of buying in expensively.   

The real question to ask, though, what would this hypothetical crash do to all the publicly traded companies' bottom lines over the long run?

effigy98

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Re: The Boomer "Crash?"
« Reply #20 on: April 05, 2016, 03:57:32 PM »
Won't it be good for the economy overall when the boomers vacate their high paying jobs and start spending their staches in the economy, freeing up those jobs for younger generations to move into?  Sure they are drawing down their investments, but they aren't hoarding the cash, they're spending it.

Very true the cash hording problem will start to fix itself potentially. This was a stated problem in a freakonomics podcast I was listening to the other day that said there is an unusually large amount of saving for the top 10% (mostly boomers) sitting on the sidelines which is really holding the economy back.

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Re: The Boomer "Crash?"
« Reply #21 on: April 05, 2016, 05:08:41 PM »
Kiyoski is all over the map, and I wouldn't listen to much of what he says, unless as maybe a contrarian indicator.

Real Estate seminars in the mid 2000s. http://www.marketwatch.com/story/rich-dad-academy-a-poor-choice-for-investors
Bullish on stock and commodities in mid 2008. http://www.thestreet.com/story/10420286/2/robert-kiyosaki-reveals-his-current-investing-strategy.html
Prepare for global disaster with gold and silver in 2011. http://news.goldseek.com/radio/1315207425.php

All those things were basically market tops.  He's more salesman than brilliant investor.

aspiringnomad

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Re: The Boomer "Crash?"
« Reply #22 on: April 05, 2016, 09:40:09 PM »
Bring it on!  The market is way overvalued, in the US at least.  We could use a return to sane PE ratios.  I'm tired of buying in expensively.   

The real question to ask, though, what would this hypothetical crash do to all the publicly traded companies' bottom lines over the long run?

If it were really demographic driven, a hypothetical crash probably wouldn't be followed by a quick recovery. It might look something like Japan where the SWR has been closer to 1% over the last couple decades as the stock market grinds downward. Thankfully, as ARS and others have pointed out, there is probably no such demographic problem in the US, at least with respect to the sheer number of millennials entering the workforce, consuming stuff, and buying equities (government entitlement programs are whole other ball of wax).

forummm

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Re: The Boomer "Crash?"
« Reply #23 on: April 06, 2016, 07:51:42 AM »
Bring it on!  The market is way overvalued, in the US at least.  We could use a return to sane PE ratios.  I'm tired of buying in expensively.   

The real question to ask, though, what would this hypothetical crash do to all the publicly traded companies' bottom lines over the long run?

If it were really demographic driven, a hypothetical crash probably wouldn't be followed by a quick recovery. It might look something like Japan where the SWR has been closer to 1% over the last couple decades as the stock market grinds downward. Thankfully, as ARS and others have pointed out, there is probably no such demographic problem in the US, at least with respect to the sheer number of millennials entering the workforce, consuming stuff, and buying equities (government entitlement programs are whole other ball of wax).

Japan is different. It's partly demographics. But also partly that their PEs got insane (over 90 at one point). And their economy is very different and very resource constrained and export driven (a lot of people on small islands with low natural resources).

infogoon

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Re: The Boomer "Crash?"
« Reply #24 on: April 06, 2016, 08:41:55 AM »
I could see US real estate markets being heavily effected. The Boomers don't give up on their current homes before the Millennials are forced to buy. It would create a low supply environment that quickly shifts to a high supply environment in a ten year window.

It's going to be really interesting to see what happens in real estate. The Boomers seem to think that they'll be able to downsize from exurban McMansions into smaller urban or suburban homes; but I don't know how much luck they're going to have selling them to the next generation. The market might not be there.

arebelspy

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The Boomer "Crash?"
« Reply #25 on: April 06, 2016, 08:47:15 AM »
I could see US real estate markets being heavily effected. The Boomers don't give up on their current homes before the Millennials are forced to buy. It would create a low supply environment that quickly shifts to a high supply environment in a ten year window.

It's going to be really interesting to see what happens in real estate. The Boomers seem to think that they'll be able to downsize from exurban McMansions into smaller urban or suburban homes; but I don't know how much luck they're going to have selling them to the next generation. The market might not be there.

Downsize?  What Mustachian boomers do you know? 

No, most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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infogoon

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Re: The Boomer "Crash?"
« Reply #26 on: April 06, 2016, 08:57:29 AM »

It's going to be really interesting to see what happens in real estate. The Boomers seem to think that they'll be able to downsize from exurban McMansions into smaller urban or suburban homes; but I don't know how much luck they're going to have selling them to the next generation. The market might not be there.

Downsize?  What Mustachian boomers do you know? 

No, most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)

It's not a matter of being Mustachian, necessarily, but I know a lot of retirees who are moving into smaller single-floor houses for medical reasons. Tough to climb the stairs to the bathroom ten times a day when your knees are shot.

Metric Mouse

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Re: The Boomer "Crash?"
« Reply #27 on: April 06, 2016, 09:34:37 AM »
Japan is different. It's partly demographics. But also partly that their PEs got insane (over 90 at one point). And their economy is very different and very resource constrained and export driven (a lot of people on small islands with low natural resources).

A great analysis. I would argue that their demographics are a huge part of the issue compared to some other factors, especially moving forward. (They're not getting better...)  But that would be nitpicking - this is quite insightful for four sentences.

forummm

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Re: The Boomer "Crash?"
« Reply #28 on: April 06, 2016, 09:37:20 AM »

It's going to be really interesting to see what happens in real estate. The Boomers seem to think that they'll be able to downsize from exurban McMansions into smaller urban or suburban homes; but I don't know how much luck they're going to have selling them to the next generation. The market might not be there.

Downsize?  What Mustachian boomers do you know? 

No, most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)

It's not a matter of being Mustachian, necessarily, but I know a lot of retirees who are moving into smaller single-floor houses for medical reasons. Tough to climb the stairs to the bathroom ten times a day when your knees are shot.

Yeah. My grandma got a chair lift for her stairs.

Japan is different. It's partly demographics. But also partly that their PEs got insane (over 90 at one point). And their economy is very different and very resource constrained and export driven (a lot of people on small islands with low natural resources).

A great analysis. I would argue that their demographics are a huge part of the issue compared to some other factors, especially moving forward. (They're not getting better...)  But that would be nitpicking - this is quite insightful for four sentences.

Thanks. They also don't allow much immigration. Another reason the US has done well and a brighter future--unless certain politicians get their way.

arebelspy

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Re: The Boomer "Crash?"
« Reply #29 on: April 06, 2016, 09:40:10 AM »
It's not a matter of being Mustachian, necessarily, but I know a lot of retirees who are moving into smaller single-floor houses for medical reasons. Tough to climb the stairs to the bathroom ten times a day when your knees are shot.

Sure.  Like I said though:
most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Metric Mouse

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Re: The Boomer "Crash?"
« Reply #30 on: April 06, 2016, 09:53:10 AM »
Thanks. They also don't allow much immigration. Another reason the US has done well and a brighter future--unless certain politicians get their way.

Agreed! Though that would fall under the demographics I mentioned earlier.  I have to be careful in my 'analysis' of Japan, or XS will kick my head in...

Ox05

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Re: The Boomer "Crash?"
« Reply #31 on: April 12, 2016, 06:46:37 PM »
As baby boomers draw down, the "echo boom", aka millenials start to increase their investments. As some have speculated, baby boomers are more likely to be on a pension plan than directly invested in the market. Couple that with the fact that millennials invest at a higher rate than other generations at a similar stage, and I think this will not drive markets significantly (http://time.com/money/4170946/millennials-saving-more-retirement/).

A more serious issue, perhaps, is that sovereign wealth funds of petro states will need to start liquidating their portfolios in the near term if oil prices persist at their low levels.

But I'm 33 and am in it for the long run, so I don't really care. Just invest in the TSP and Betterment a couple times a month and forget it.

Cassie

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Re: The Boomer "Crash?"
« Reply #32 on: April 12, 2016, 09:51:49 PM »
We downsized when we were 53 and 58 and decided to semi-retire.  Some of our friends thought we were crazy. We knew one couple that at age 67 received an inheritance and immediately bought  a 3000 sq ft house for the 2 of them even though if one of them becomes unable to work they can't afford it.  3 years later they can't keep it clean and can't afford cleaners. They don't entertain large groups, of people either so don't know what the point was.   We know very few people that are following suit of what we did.

Metric Mouse

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Re: The Boomer "Crash?"
« Reply #33 on: April 13, 2016, 03:29:46 AM »
We downsized when we were 53 and 58 and decided to semi-retire.  Some of our friends thought we were crazy. We knew one couple that at age 67 received an inheritance and immediately bought  a 3000 sq ft house for the 2 of them even though if one of them becomes unable to work they can't afford it.  3 years later they can't keep it clean and can't afford cleaners. They don't entertain large groups, of people either so don't know what the point was.   We know very few people that are following suit of what we did.

It's almost as if this went in the wrong thread...

forummm

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Re: The Boomer "Crash?"
« Reply #34 on: April 13, 2016, 08:41:09 AM »
We downsized when we were 53 and 58 and decided to semi-retire.  Some of our friends thought we were crazy. We knew one couple that at age 67 received an inheritance and immediately bought  a 3000 sq ft house for the 2 of them even though if one of them becomes unable to work they can't afford it.  3 years later they can't keep it clean and can't afford cleaners. They don't entertain large groups, of people either so don't know what the point was.   We know very few people that are following suit of what we did.

It's almost as if this went in the wrong thread...

It could follow from the discussion some posts earlier about downsizing.

Metric Mouse

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Re: The Boomer "Crash?"
« Reply #35 on: April 14, 2016, 04:34:31 AM »
We downsized when we were 53 and 58 and decided to semi-retire.  Some of our friends thought we were crazy. We knew one couple that at age 67 received an inheritance and immediately bought  a 3000 sq ft house for the 2 of them even though if one of them becomes unable to work they can't afford it.  3 years later they can't keep it clean and can't afford cleaners. They don't entertain large groups, of people either so don't know what the point was.   We know very few people that are following suit of what we did.

It's almost as if this went in the wrong thread...

It could follow from the discussion some posts earlier about downsizing.

Ahh... my mistake.

EarlyStart

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Re: The Boomer "Crash?"
« Reply #36 on: April 17, 2016, 09:22:13 PM »
The biggest flaw in that logic is that it only considers the one generation. The largest generation in the country (millennials) are approaching household formation-age. That's an unequivocal positive. Maybe there's some way to net the two, maybe there isn't. But it doesn't make sense to only consider the one generation...

Unless of course, you're the author of Rich Dad, Poor Dad, and you need to convince people to pay for your program, not invest in stocks and bonds.



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Re: The Boomer "Crash?"
« Reply #37 on: April 18, 2016, 04:52:14 PM »
Keep in mind that the boomers are the last generation with pensions.

Not true. Almost any employee of a federal or state government gets a pension. As do several employees of financial and oil companies.


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Re: The Boomer "Crash?"
« Reply #38 on: April 19, 2016, 04:41:01 AM »
Keep in mind that the boomers are the last generation with pensions.

Not true. Almost any employee of a federal or state government gets a pension. As do several employees of financial and oil companies.

All sorts of energy companies, actually. And many utilities.  I would suspect many union jobs offer such benefits.

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Re: The Boomer "Crash?"
« Reply #39 on: April 19, 2016, 04:32:11 PM »
An exaggerated fear, if you ask me, and my predictions are wrong 80% of the time. Lots of boomers didn't save (millennials are actually doing a better job) and it will be a slow withdrawal over several decades with lots more of young'uns buying.  Returns should be decent over the next few decades, assuming anyone can predict the future which is doubtful

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Re: The Boomer "Crash?"
« Reply #40 on: April 19, 2016, 09:45:55 PM »
Over 40% of households ages 55-64 have $0 in retirement savings. Does the guru take this into account when making his dire prediction?

This number is irrelevant to the argument. When people talk about the 'wealthy' they're mostly talking about boomers.

http://www.financialsamurai.com/the-average-net-worth-by-age-for-the-upper-middle-class/

This actually hurts your argument.  The rich don't draw down their accounts in retirement, at least not significantly like someone who actually needs that money. People who live on SS and have a small 401k of lets say 100k are likely to draw down their accounts over time unless they really control their spending. These individuals also don't have a huge impact because they have so little. For someone with a 10million+ portfolio drawing it down isn't a concern anymore. The portfolio is likely growing faster than their withdrawals. They are more concerned with with estate planning. Since they don't need the money they can also be more aggressive with it since it is likely going to beneficiaries so they have less incentive to make the portfolio more conservative.

So a high % of people with 0 and a high % of people with millions means there are a lot of people who won't actually be significantly drawing down their accounts. For boomers to have any effect you would need a lot of people who will be drawing down their portfolios.

A very large amount of boomer's money is actually expected to be passed onto the next generation.

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Re: The Boomer "Crash?"
« Reply #41 on: April 20, 2016, 12:31:00 AM »

Downsize?  What Mustachian boomers do you know? 

No, most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)

Yep!!  6 years ago as the Boomers I work with could almost taste their retirement, there were all these great plans around the office to sell everything, downsize, and travel the world.  Now that they've actually started to retire, it's not happening.  Firstly, because they really don't want to sell all their crap and secondly because, "We need to keep the big house for holiday dinners (it's tradition!) and so the grandkids have a big basement and yard to play in."  :/  Thirdly, because the idea of moving everything (and change in general) is pretty damn exhausting to a senior citizen?  ...They get mad at me if I say the words "senior citizen," but you're damn sure they take advantage of seniors' day at different stores.  (Still buying crap.)

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Re: The Boomer "Crash?"
« Reply #42 on: April 25, 2016, 01:42:11 PM »

It's going to be really interesting to see what happens in real estate. The Boomers seem to think that they'll be able to downsize from exurban McMansions into smaller urban or suburban homes; but I don't know how much luck they're going to have selling them to the next generation. The market might not be there.

Downsize?  What Mustachian boomers do you know? 

No, most I know refuse to admit they're getting older, think downsizing would be losing, and have no intention of admitting either.  They'll stubbornly stay where they are, despite what would be better for them, as long as possible.

(This isn't specific to Boomers, but they're the ones that happen to be nearing that age.)

It's not a matter of being Mustachian, necessarily, but I know a lot of retirees who are moving into smaller single-floor houses for medical reasons. Tough to climb the stairs to the bathroom ten times a day when your knees are shot.

Yeah. My grandma got a chair lift for her stairs.

Japan is different. It's partly demographics. But also partly that their PEs got insane (over 90 at one point). And their economy is very different and very resource constrained and export driven (a lot of people on small islands with low natural resources).

A great analysis. I would argue that their demographics are a huge part of the issue compared to some other factors, especially moving forward. (They're not getting better...)  But that would be nitpicking - this is quite insightful for four sentences.

Thanks. They also don't allow much immigration. Another reason the US has done well and a brighter future--unless certain politicians get their way.

What happens when all these boomers start dying off? How many Millennials are in the market nowadays for $600k plus homes that are 30 minutes away from downtown? There is a huge shift from the 'burbs toward city living. Also, home prices have outpaced incomes. For instance, my inlaws purchased a ~$200k house on a household salary of ~$60k back in the early 80's. Their home is currently worth north of $600k. An inflation adjusted income from 1980 until now would be only ~$120k for the household. There's no way one would get approved for a $600k ++ house with that income. So, you are now only selling to people that make $150-200k + per year. That's only 5% of all working Americans. How many homes out there are "worth" more than $600k? Way more than 5% I'd estimate.

This, in my estimation, will cause a major devaluation of high end homes in the next 20-30 years as boomers die and nobody is there to purchase those homes. The only people that would be in a position would be Gen X, but as stated above that generation is significantly smaller than the boomer generation.

When all these boomers start dying what's the likely scenario, the kids keep the house and someone moves in, or they put it on the market to sell it?

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Re: The Boomer "Crash?"
« Reply #43 on: April 25, 2016, 02:56:02 PM »
When all these boomers start dying what's the likely scenario, the kids keep the house and someone moves in, or they put it on the market to sell it?

There's another option: grandma dies, none of the kids live in town any more, the house sits vacant for the foreseeable future.

This is how cities in the Rust Belt got thousands of vacant houses.

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Re: The Boomer "Crash?"
« Reply #44 on: April 25, 2016, 03:13:55 PM »
When all these boomers start dying what's the likely scenario, the kids keep the house and someone moves in, or they put it on the market to sell it?

There's another option: grandma dies, none of the kids live in town any more, the house sits vacant for the foreseeable future.

This is how cities in the Rust Belt got thousands of vacant houses.

That's true!  Those kids didn't go away to a fancy college, turn into Starbucks hipsters, just to turn around and come back to Flint or Saginaw.

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Re: The Boomer "Crash?"
« Reply #45 on: April 25, 2016, 04:45:08 PM »
There is a huge shift from the 'burbs toward city living.

That's mostly a misnomer.  Millennials don't live in cities any more than their parents did, at the same age. It's just that they're young, and haven't hit the "move to the suburbs phase."

And if you argue they won't, consider this: the average millennial ALREADY lives in the suburbs, not the city.
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Re: The Boomer "Crash?"
« Reply #46 on: April 25, 2016, 07:01:00 PM »
My parents are boomers and have a decent size portfolio which they don't really need to draw down because of SS, pensions, and part-time work.  They choose to continue working part-time because their health would deteriorate rapidly if they just stopped working, they have not developed hobbies or a social circle outside of work.  They can continue to be aggressive with their portfolio barring a major medical condition.  However, because of RMDs they have to develop a strategy to start withdrawing now to keep them at the lower marginal tax rates vs when they both have to start withdrawing, while collection SS, pensions, and have earned income from part-time work.

RMDs will force boomers to liquidate their holdings so the government can get their cut, how much that will affect the markets, who knows?

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Re: The Boomer "Crash?"
« Reply #47 on: April 25, 2016, 07:15:39 PM »

RMDs will force boomers to liquidate their holdings so the government can get their cut, how much that will affect the markets, who knows?

My father's RMD at 75 has been right around 3% of prior year end balance.  I think it's trivial.

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Re: The Boomer "Crash?"
« Reply #48 on: April 26, 2016, 01:01:06 AM »
RMDs will force boomers to liquidate their holdings so the government can get their cut, how much that will affect the markets, who knows?

Why would that hurt the markets?  If they need the money that they take out, they spend it, which helps the economy.

If they don't need the money, they likely just stick it in a taxable account, keeping it invested.  They lose a small percent to taxes, say 10-25% of the 3% they have to take out (using FV's number).  Next loss to market: 0.45% that changes to tax revenue.

Unless they're taking it out and sticking cash under a mattress (and the type who have enough invested that it'd make a difference isn't the type to do this), it shouldn't affect the economy/markets negatively.
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Re: The Boomer "Crash?"
« Reply #49 on: April 26, 2016, 07:31:35 AM »
When all these boomers start dying what's the likely scenario, the kids keep the house and someone moves in, or they put it on the market to sell it?

There's another option: grandma dies, none of the kids live in town any more, the house sits vacant for the foreseeable future.

This is how cities in the Rust Belt got thousands of vacant houses.

True, but it supports the argument that home prices may drop significantly due to too much inventory at too high a price point, or a rapidly deteriorating neighborhood that nobody wants to live in because all the homes are old and vacant and aren't being taken care of.
« Last Edit: April 26, 2016, 08:09:38 AM by DrFunk »