GAO: Market Collapse from Boomer Asset Selloff Not Likely

The US Government Accountability Office (GAO) pointed out in its report that expected increases in life expectancy and the need for more assets to fund a longer retirement will likely prompt retirees to spread any asset sales over a longer period and to continue working past a traditional retirement age. That gradual boomer transition into retirement mitigates the risk of a shock to financial markets, the GAO said.

Another factor in the GAO’s analysis is that data has shown current retirees experienced an overall slowdown in spending of assets in retirement, with many retirees continuing to add equities to their portfolios. “To the extent that baby boomers behave like current retirees, a rapid and mass selloff of financial assets seems unlikely,” the GAO said.

But that does not mean the boomer retirement trend will pass without significant consequences, the report warns. Now more important than ever will be the extent to which retirees have personal savings and how rich a return they have achieved on that pot of money.

“This is due, in part, to the decline in traditional pensions that provide guaranteed retirement income and the rise in account-based defined contribution plans,” GAO researchers wrote. “Also, fiscal uncertainties surrounding Social Security and rising health care costs will ultimately place more personal responsibility for retirement saving on individuals.”

The report continued, “For those with sufficient income streams, this new responsibility for retirement will entail a lifetime of financial management decisions – from saving enough to managing such savings to generate an adequate stream of income during retirement, the success of which will directly or indirectly be dependent on rates of return. Given the potential impact of even a modest decline in returns over the long run on savings and income, market volatility, and uncertainties about pensions, Social Security, and Medicare, the onset of the baby boom retirement poses many questions for future retirement security.”

The GAO report is here .

One demographer recently agreed that the fear of catastrophic effects of mass Boomer retirement was overblown (See Fear of Mass Retirement of Boomers Overblown ).