More confirmation that retiring baby boomers will not (repeat, will not) cause a drag on the economy. One question debated over and over is whether or not the boomer stock and bond sell-off will crash the market. According to the Congressional Budget Office, the answer is no.
As reported by The Street‘s Joe Mont, Marika Santoro of the CBO’s macroeconomic analysis division challenges warnings from some economists who expect security prices to fall dramatically as boomers sell assets to finance retirement. The CBO report calls the dire prediction “unlikely.”
“On the surface, the warnings are hardly illogical,” Mont writes. “There’s always a precarious balance between retirees selling assets and younger generations buying them to increase savings. Given the large number of boomers nearing retirement, it’s possible that demand from younger investors won’t keep pace as they cash out, causing prices to drop.
“The CBO, however, predicts that baby boomers won’t sell their assets quickly after they retire. They will be cautious because they might need them in the future due to expected increases in lifespan and medical costs. The financial turmoil of the past year will further engender a conservative approach to retirement spending. The recession will also force many of them to delay their retirement.”