The WSJ has a piece out on the demographic effects of the baby boomers retiring:
The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades.
U.S. law requires anyone age 70 ½ or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay taxes on those distributions. The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.
The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.
This is one of our six mega trends, the change in dependency ratios globally:
Not really much here to add from the investment side, but I’m sure MBers will understand the pain that the baby boomers feel when they are asked to actually pay tax on investment earnings. I especially love the obligatory quote from a retiree:
Jack Weaver, a retired biopharmaceutical product developer, turned 70 in late 2015 and had to pay taxes on his first required payout of $31,000 last year. “It’s unwanted income,” he said. He reinvested the money, and says his wife plans to do the same when she takes her first distribution this year.
Based on the size of his required payout, he looks to have over a million Aussie dollars in his own name. I’m also guessing he has been making contributions for his wife or she has been working and so she might have a similar amount in her name. Plus the family home. Plus any other assets that they have outside of retirement savings.
This sounds awfully like a “first world problem”…
Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):