Baby Boomers Investment Returns Will Be Constrained
Will baby boomers cause our own investments to decline? According to one researcher, the answer is yes. There are so many of us that our collective retirement investing and spending plans are destined to negatively impact investment returns for everyone. How can this be?
The logic is relatively simple and in three connected parts:
First, as baby boomers retire in mass quantities (it’s already started), the ratio of U.S. retirees to active U.S. workers will explode upward.
Second, when baby boomers become retirees, we will begin to sell our mutual funds, stocks, and bonds to generate income to support ourselves. Unfortunately, there will be fewer non-boomer investors to buy what we are selling. According to the law of supply and demand, the prices we can get for our investments will be suppressed.
Third, boomers will still create a strong demand for goods and services but with a limited supply of workers to provide them, the prices of goods and services we need will increase.
I don’t like the sound of any of this but it is hard to argue with it. Therefore, the safe strategy is to be prepared for it. Make it part of your retirement plan. If the prediction is wrong, you will be that much better off.
Here is a link to the full article including an interview with the researcher.
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