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I'm sure it's been modeled to pieces, but the returns are beyond the point. The point is that people aren't just dropping contributions evenly in the total stock market, and contributions are steady across time because demographics aren't steady.
https://usafacts.org/articles/which-...e-most-wealth/ This article shows where people have money by generation. Look at Boomer amount in retirement funds vs silent generation. Then look at how much millenials are contributing lol.
My point is this, there's never been large scale withdrawal from S&P funds like there will be when boomers start withdrawing from their retirement funds. Since S&P ETF inception, people have been contributing much more than withdrawing simply due to retirement structures and demographics. When these people start withdrawing en masse it HAS to dampen returns. And given the state of boomers retirement savings, most are likely to actually use their savings cause they'll need them.
I'm sure it's been modeled to pieces, but the returns are beyond the point. The point is that people aren't just dropping contributions evenly in the total stock market, and contributions are steady across time because demographics aren't steady.
https://usafacts.org/articles/which-...e-most-wealth/ This article shows where people have money by generation. Look at Boomer amount in retirement funds vs silent generation. Then look at how much millenials are contributing lol.
My point is this, there's never been large scale withdrawal from S&P funds like there will be when boomers start withdrawing from their retirement funds. Since S&P ETF inception, people have been contributing much more than withdrawing simply due to retirement structures and demographics. When these people start withdrawing en masse it HAS to dampen returns. And given the state of boomers retirement savings, most are likely to actually use their savings cause they'll need them.
How big is the difference in withdrawals and contributions going to be? How much will steadily increasing IRA and 401-K contribution limits affect the imbalance? Haven't we been in the early stages of the Boomer retirement/withdrawal phase for several years already? Lots of moving pieces here beyond "Boomers retiring will kill index investing".
My point is this, there's never been large scale withdrawal from S&P funds like there will be when boomers start withdrawing from their retirement funds. Since S&P ETF inception, people have been contributing much more than withdrawing simply due to retirement structures and demographics. When these people start withdrawing en masse it HAS to dampen returns. And given the state of boomers retirement savings, most are likely to actually use their savings cause they'll need them.
But go ahead & sell all your equities if you believe it. Post your transactions so we know you followed through.
But go ahead & sell all your equities if you believe it. Post your transactions so we know you followed through.
Lol, I'm not advocating any weird actions like that, all I'm saying is that advisors may be misattributing passive benchmark investing virtues, mistaking some of the performance for simple contribution bias. Most things cycle, so would it be weird to think that active management or other sectors / slices may catch back up?
Quote:
Originally Posted by 1insider
How big is the difference in withdrawals and contributions going to be? How much will steadily increasing IRA and 401-K contribution limits affect the imbalance? Haven't we been in the early stages of the Boomer retirement/withdrawal phase for several years already? Lots of moving pieces here beyond "Boomers retiring will kill index investing".
Bigger than it is now, because there's not much withdrawal now. There's not that many silent generation folks with index fund retirement accounts withdrawing. Boomers are just at retirement age now, people wouldn't start drawing down the nest egg till later when medical expenses and cash shrink. Contributions can't be significantly higher due to 401K limitations for future generations and Gen Z / alpha is noticably smaller than millenials.
I'm not trying to preach a specific buy / sell, but you can guesstimate from demographic dates that sometime in the next 10 years we'll see the effects of having more withdrawal than we have now.
Quote:
Originally Posted by FearNotChooseLife
Do you have any idea what percentage of the S&P's market cap is owned in retirement accounts such as 401Ks, IRAs, etc.? I've tried finding that information before, but was unable to find it from a reputable source. It would be helpful to know what that percentage is today versus what is has been historically.
I agree, a lot of folks don't care about fundamentals or valuations. Their strategy is just to throw money at the S&P and hope for the best. That's what they've been told to do by the "experts."
I haven't been able to find this, it would be useful to know.
Here's a summary of some 401k statistics from late 2021. Take a look at the allocation bar chart near the bottom of the FAQ page below, a comparison of "Participants in their 20s" and "Participants in their 60s". The old folks have much lower percentages in equities.
Here's a summary of some 401k statistics from late 2021. Take a look at the allocation bar chart near the bottom of the FAQ page below, a comparison of "Participants in their 20s" and "Participants in their 60s". The old folks have much lower percentages in equities.
Boomers are turning age 59-77 this year, so as a group they've already trimmed their equity allocation quite significantly.
When I was in my 20's, even 30's, I had literally nothing invested. I think it's probably more common for a portfolio to even exist, after the 40's hit. That was certainly the case with me and my siblings as well.
With respect to demand for U.S. equities, there are lots of potential buyers across the planet including both individuals and corporations. There are plenty of ready buyers.
The bigger question is what happens to consumer spending as the boomers age? Young retirees, let's say those in their 60s, spend a lot of money on vacations, are still buying cars, etc. When people hit the 70s this spending slows down. Age 80 and beyond many can no longer travel easily, or are just tired of airports, hotels, crowds. Most have probably purchased their last car. By and large they no longer golf, ski, ride bicycle. The impact on these leisure industries could be significant.
When I was in my 20's, even 30's, I had literally nothing invested. I think it's probably more common for a portfolio to even exist, after the 40's hit. That was certainly the case with me and my siblings as well.
It would be interesting to see a breakdown showing age groups from 20s through 80s, with both percentages and dollar amounts. It's probably on ici.org somewhere, but I'm not motivated enough to look very hard, haha. Maybe someone else can take the baton?
In terms of sheer dollars I'll guess it's probably people 5-10 years out from retirement that have the most in equities. Young people don't have a lot of money invested, and older people have trimmed back on stocks. Of course there are individuals who never trim back even in retirement, but in aggregate retired people tend to have more cautious allocations.
Then there are the wealthy folks who don't think in the same terms as us small fry, but most of their assets aren't in 401k accounts. They're not concerned with safe withdrawal rates, but rather how do they keep compounding their net worth. Even in their 80s and 90s they could still be invested aggressively since they're investing for their kids or their charities.
today there is a lot of job hopping and a lot of movement of their 401ks with many rolling them in to their iras .
so each time they start a new 401k the balances really dilute the amount of money that stats show is in 401ks …
i took all my money out and rolled it twice over the years in to my ira …..
i have a new one today that i started where i put the money from working one day a week .
looking at my 401k it would appear i have little in one
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