Some have argued that baby boomers’ retirement poses a threat to working Americans’ savings. The value of workers’ saved assets, they say, could drop once retiring boomers stop buying new assets or sell off current assets in order to have more cash on hand. So writes Nicola Moore at Heritage.org.
Such swings in supply or demand would have to be substantial to have a real impact on asset values, and the notion that 78 million baby boomers, who own 50 percent of all financial assets in the U.S.,could create critical mass was a common refrain of those opposed to Social Security reform in 2005. However, a new report from the Congressional Budget Office (CBO) has found that boomers are unlikely to dump assets or create a demand vacuum that would cause asset values to fall, Moore writes. This finding is significant, she argues, because it means that pre-funded retirement savings in IRAs, 401(k)s, or other personal savings vehicles of today’s workers will not lose value when boomers retire.
“The sheer number of baby boomers is often considered the driving force behind many future budgetary dilemmas, such as the affordability of Social Security and Medicare. However, with the new CBO study, retiring boomers and working savers can now rest assured that asset values are insulated from any damage that may be caused by the coming tidal wave of boomer retirement. This finding should give savers and policymakers more confidence about the returns of pre-funded retirement savings accounts.”