Boomers Suffering from Withdrawal?

Not likely you say? Since when are baby boomers getting shy? Not talking about that kind of withdrawal. We’re talking about the kind of withdrawal you make at the bank, and specifically, what happens to the U.S. economy when a lot of baby boomers start withdrawing their savings and portfolios all at once.

Is this scenario just one more event that the 24 hour news machine would have you freak out about? Or is it real?

Let’s look at the numbers. There are 78 million or so boomers -- but they are not all retiring at once. However, according to the Investment Company Institute, 44 percent of all mutual-fund shareholders are baby boomers. So let’s say that over the next couple of decades, they all start drawing down on these funds. Are there enough younger investors behind them to pick up the slack? Doubtful.

The theory is that the economy drives the market, but you can’t discount demographics. Ten thousand people retiring every day for 20 years (and drawing down on their savings) is going to have a dramatic effect on the markets. Twenty years from now, almost 20 percent of Americans will be age 65 or over, and that’s a lot of people slurping away at their savings. Experts point to Japan’s stagnant economy for a lesson in what happens when more than a quarter of your population is over 65.

Yet another sign of trouble in paradise is the increasing number of boomers who are shifting to bonds and dividend income stocks as they near retirement. Investing for the long-run is no longer a viable option for boomers on the cusp of their twilight years.

So, is the sky falling or not? Boomers did have a bunch of kids and those kids are now investors themselves. That helps, but experts suggest three specific courses of action: 1) Avoid Japan and Europe and look to invest in countries with younger populations. 2) Match stock picks to national demographic trends (e.g. agriculture in India). 3) Stick with income-producing equites and corporate bonds.

Finally, my personal advice: stop watching the 24-hour news cycle and try to enjoy your final years on earth.

Jay Harrison is a graphic designer and writer whose work can be seen at DesignConcept and at BoomSpeak. He's written a mystery novel, which therefore makes him a pre-published author.