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June 28, 2006

What happens when the boomers cash out?

Many investment analysts are worried about what will happen to the stock market when the baby boomers retire and begin withdrawing their funds. N.C. State University's Mike Walden says that they are worried we will see a big crash in the market, but others aren't so sure.

"There is a very well-respected investment analyst named Jeremy Seigel. He has a new book coming out talking about this very issue. He’s worried," says Dr. Walden, "about the fact that increasingly every day more baby boomers retire.

"They are still the biggest generation in the country. And when they retire they will likely cash out some, maybe all, of their stock holdings. And could that send the stock market plunging? Seigel actually thinks it can, it will. So he’s written a book to tell people how to plan for that.

But, adds the agricultural and resource economics professor, "there are folks who are on the other side of that fence who say, 'No we are not going to see a crash in the stock market. Number one, there will always be buyers for stocks.' And they see a growing number of buyers from other countries where the birth rate is larger and where they are producing more adults.

"And those analysts think that those buyers will come in and simply snap up U.S. stocks and support the price," Walden explains.

"They also say that we shouldn’t forget that the U.S. has seen a rising standard of living, and even though we may have fewer buyers in the future if those buyers have more income that can also put a prop under the stock market."

Posted by deeshore at June 28, 2006 08:19 AM