In recent articles, I wrote of the General Accountability Office’s endorsement of Wall Street’s rosy view of the retirement prospects of Baby Boomers, and also questioned assumptions regarding expected total return on which these views are based.

The Great Retirement Experiment
The Great Retirement Experiment

One question that remains is the value of assets that Baby Boomers must sell in future years if they are to achieve their retirement expectations.

Daniel R. Ackerman, CFA, on his web site, The Great Retirement Experiment, has published two free e-pamphlets that are worth reading and that not only question the wisdom of pinning retirement expectations on past stock market total returns, but also provide estimates of the volume of assets that Boomers would have to liquidate in order to achieve their retirement goals.

Estimating Baby Boomer Future Liquidations

For example, these studies suggest that for Boomers to realize their expectations (based on the commonly-held belief of an 8% annual return on equities), would require, at current prices, $1.7 trillion in annual asset sales by the peak year 2027.

This is not to say that Boomers will really sell that volume of investments in 2027, for they may not achieve their hoped-for returns of 8%.

The point, however, is that, either the Boomers won’t meet their goals because their expectations of total returns were over-optimistic, or that if these goals are actually met, the volume of investments that would need to be liquidated to benefit from this ‘wealth’ would be so great as to make cashing out at these levels impossible.

Commonsense Long-Term Strategies

Now, although nobody can reasonably forecast the US capital market over the next thirty years, a commonsense examination of relatively simple projections suggests two strategies for long-term investors:

  • If you are a Baby Boomer: Get out of investments whose returns depend upon your ability to sell out to someone else ten or fifteen years from now. It would be better to increase your savings and count on reinvesting income and principal that is promised to be paid by issuers.

  • If you are a Post-Boomer: Don’t get suckered into the same equity-mutual fund trap as your elders and be ready to take advantage of investment opportunities that arise as Boomers are forced to sell investment assets to pay for their retirement.

Now, most people won’t take this advice, but rather will continue to invest on the basis of mutual fund advertisements in Money Magazine.

To me, this suggests that many Baby Boomers will end up reducing budgets to make it through their Golden Years and maybe will need to move in with their children (if they will have them).


The Milken Institute debate that was highlighted in an earlier article, Common Stock Legend Disavowed: Professor Siegel’s Epiphany, brought into focus two opposing views regarding the possible negative impact on stock prices to be caused by the retirement of the Baby Boomer generation.

Michael Milken, the Chairman of the Institute, took an optimistic stance, suggesting that the problem would probably resolve itself through improvements in technology and productivity enhancements.

Linking economic stability and growth to enhanced productivity and new technology is a popular theme among economists, including ex-Federal Reserve Chairman Alan Greenspan.

Productivity and Technology Can’t Save the Baby Boomers

As described in the essay, “Profits and Population“, American economic growth over the last fifty years has had more to do with the expansion of the number of people working in the money economy than with advances in technology and productivity.

The initial impact of productivity improvements and new technology is to put people out of work.

Unless government policy and societal customs encourage education, savings and investment, and entrepreneurial activity, higher paying new jobs will not be created fast enough to employ workers displaced by productivity enhancement and new invention.

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