Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Grant Williams Warns Get Out of Stocks Before Boomers Are Forced to Sell Them

Stock-Markets / Stock Market 2017 Jun 30, 2017 - 04:31 PM GMT

By: John_Mauldin

Stock-Markets

BY STEPHEN MCBRIDE : Last year, the first baby boomers turned 70 and that spells trouble for investors.

Speaking at the Mauldin Economics Strategic Investment Conference, Grant Williams, Co-Founder of RealVision TV, warned investors about the wave of forced selling by millions of retirees and the impact it will have on their portfolios.


Equities Make Up 70% of Boomers’ Portfolios

“Boomers are the largest generation in history to retire, and they’re doing so right now.”

In fact, according to Pew Research, 1.5 million Americans turned 70 last year and will do so every year for the next 15 years.

“When Boomers are retiring in their millions, they have 70% of their portfolios in equities… at a point in time when we are due a recession,” pointed out Grant Williams.

“And in recession, bad things happen… the average stock market drawdown in recession since 1980 is 37%.”

Just $136,000 Saved for Retirement

While boomers have their biggest allocation to equities they’ve ever had, Williams says the numbers don’t look good for them: “The reality is they don’t have enough money to retire.”

“According to BlackRock, the average Boomer has only $136,000 saved for retirement. Even with return assumptions fixed at 7%, when they’re more like 2%, you are talking an income of $9,000 a year… that’s $36,000 shy of the ideal retirement income,” adds Williams.

As such, boomers will be forced to look for income elsewhere. In the not-so-distant past, that has come from bonds.

As the below chart shows, once you hit the age of 65, you go through the most profound asset class shift since your 30s. You trim your equity positions and raise your bond exposure to lower the risk.

Source: Haver Analytics, Gluskin Sheff

However, with today’s yields, bonds won’t provide the needed income.

Even if boomers decide to stick to equities for higher yields, there’s another reason they will be forced to divest their equity holdings—one they have little choice in.

Forced to Sell 5% of Their Portfolios Every Year

Due to IRS mandatory minimum drawdown laws for retirement plans like IRAs and 401(k)s, when you turn 70 ½, you are forced to withdraw at least 5% of the value of the plan each year.

Williams thinks it will have profound implications: “Boomers started turning 70 ½ in April, this is a real problem and people don’t understand the ramifications of it.”

This forced selling will flood the market with billions worth of equities, which will push down prices.

Given that 15 million retirees will be forced to divest their equity holdings over the next decade, Grant has some thoughts on what investors like you and me should be doing today: “Get out of equities. You might think you’re a wealthy guy… but if you have 70% of your portfolio in equities and you take a 40% haircut, you’re not a wealthy guy anymore.”

What Does This Mean for the US Economy?

For Grant’s thoughts on what the retirement crisis means for the US economy, big demographic trends, and more—watch the full interview below.

Download a Bundle of Exclusive Content from the Sold-Out 2017 Strategic Investment Conference

Get access to exclusive interviews with top asset managers Raoul Pal and Louis Gave from SIC, an ebook from renowned geopolitical expert George Friedman, and bonus SIC 2017 content…

Claim your SIC 2017 bundle now!

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in