Retiring boomers' impact on assets

With the 78 million baby boomers born between 1946 and 1964 beginning to retire (the oldest having turned 62 in 2008), some economists had warned of a fall in prices of assets as boomers sold their holdings to finance their retirement. However, a paper from the Congressional Budget Office (CBO) reports that such a scenario is unlikely, based on the behavior of earlier groups of retirees. CBO cites three factors:

1. Retirees generally are cautious about selling assets to finance consumption because they might need those assets in the future. They might live longer than expected, and medical costs, which are likely to rise as people age, could be higher than anticipated.
2. Rather than spend all of their assets, retirees might intentionally retain some to make bequests.
3. Wealth in the United States is highly concentrated: One-third of the nation’s financial assets is held by the wealthiest 1 percent of the U.S. population. The wealthiest people do not spend significant portions of their assets during retirement and in most cases die leaving bequests.

Will the Demand for Assets Fall When the Baby Boomers Retire?
      Report (pdf, 33pp/788kB), Sept. 2009
      Blog, Sept. 8, 2009