Will the Stock Market Dip Once Boomers Take Out Retirement? Here’s What Experts Say
Written by
Yaël Bizouati-Kennedy
Edited by
Carly Brashears
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Boomers — individuals born between 1946 and 1964 — represent 21% of the U.S. population, according to Axios. And as The Washington Post reported, from now until 2030, 10,000 baby boomers each day will hit retirement age. In turn, this has had and will continue to have many ramifications for the economy.
One such impact: What will happen to the stock market once they take out their retirement savings? While some experts warn that the market will dip, others have a more nuanced view.
Boomers Aren’t All Retiring At Once, So Any Impact Will Likely Be Gradual
Various factors, including a difficult economic landscape due partly to inflation and soaring rates have caused the notion of retirement to become more fluid than it once was, with many Boomers working later than usual or even re-entering the workforce.
For instance, Joe Camberato, CEO, National Business Capital, said that he doesn’t anticipate a sudden, all-encompassing event when a significant percentage of boomers retire.
“I don’t foresee a mass exodus of boomers rushing to cash out their retirement funds,” he said. “Generally, most baby boomers have been financially responsible, paying off their homes and minimizing debt while saving for retirement.”
Camberato also noted that people are choosing to retire at varying stages in their life, which creates a more gradual and manageable transition for the market.
“Retirement dates vary widely, with some people working well into their 70s and 80s while others retire in their 60s,” he said.
No Significant Crash As Boomers Are Cautious With Their Investments
Baby boomers — about 78 million people in the U.S. — will start withdrawing from their investment portfolios, which includes stocks, but they aren’t just cashing out and spending everything; they’re thinking about living longer and leaving money for their kids, according to Jeff Rose, CFP, founder of Good Financial Cents.
“This careful spending might keep the demand for stocks from crashing. Plus, the richest boomers, who own a lot of these stocks, might not need to sell much to live on,” said Rose.
In turn, Rose said that this won’t cause a significant dip in the stock market, as many boomers are cautious with their retirement savings, which means they might not sell off their stocks rapidly.
“This cautious approach could keep the stock demand stable. Plus, other market dynamics like new stock offerings and global investment trends could offset any potential decline caused by the Boomers’ retirements,” he said. “So, the impact might be less dramatic than some predict.”
A More Nuanced Dynamic
Jenna Biancavilla, founder and wealth advisor, Pearl Capital Management, noted that as the idea of a significant market sell-off looms over the retirement of boomers, a closer look unveils a more nuanced reality.
Indeed, boomers are gearing up for a lengthy retirement, shaping their investment strategies for a more long-term “buckets strategy” approach, she said.
“In navigating retirement, most retirees plan to invest funds strategically — earmarking some funds to be spent in the near future, others to be invested for the next decade, and others invested long-term for their heirs,” she said. “This approach suggests a sizable portion of their wealth will remain actively invested, potentially stabilizing the market.”
In addition, she explained that unlocking retirement funds from pensions adds another layer, as boomers may reinvest some of these funds back into the market.
“This injection of capital might mitigate the feared market downturn,” she said. “In essence, while concerns about market volatility persist, baby boomers’ collective behavior hints at a measured and optimistic approach to retirement investing. Strategic investment allocation, the generation’s optimism, and the release of pension assets create a complex interplay of factors that could influence the market beyond a simple sell-off narrative.”
It Might Be a Different Story for Younger Boomers
Retirements among the older boomers have so far not had a particularly negative effect on the equity markets, but for younger boomers — who have seen both the value of their retirement holdings and the purchasing power of the dollars they’ll eventually receive hammered over the last few years – this might tell another tale, said Peter C. Earle, an economist at the American Institute for Economic Research.
“From January 2020 to April 2020 the S&P 500 fell about 10%, then rose 64% until December 2021, but by September 2022 had fallen by 25% again.” Earle said. “And that volatility came on top of the fact that the value of the dollars they’ll be receiving is right now between 16 and 19% lower than it was just three years ago. It’s not difficult to imagine a scenario in which the arrival of a recession or a falling market drives boomers still in the market to rush for the exits — all at once.”
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