The next housing crash and the next stock market crash may be created by the same thing: retiring baby boomers. I can almost hear the loud crashing boom in the not-so-distant future. In 2012, a Forbes article covered the question of whether 77 million retiring boomers would crash the stock market. Between 2012 and today, the boomers have not yet negatively impacted the market. In fact, the group surprised everyone by putting more money into the market. Still, it seems everyone is a little confused about what the baby boomers are up to. A recent article by MoneyTalksNews reported that boomers are retiring in droves since household wealth has climbed to an all-time high. However, another recent USA Today article claims most boomers say they may never retire at all. As a member of Generation X, I’m always trying to guess what boomers will do so I know how to intelligently manage my money.
Going back to college
If baby boomers retire in droves, it may make sense to go back to college to earn a degree related to the medical field since boomers will need nursing care. If the majority of boomers have no intention of retiring, it doesn’t make sense to invest the money in tuition when I could carry on with my current career. My younger son is earning a degree in the medical field, which should work out well since boomers and Generation X will eventually retire and need care. According to USA Today, 65 percent of boomers plan to never retire or, at least, work past age 65.
Staying in my home
I would buy a step-up home, but the baby boomers are artificially inflating the cost of trade-up homes. Many of them are buying new construction homes, which is temporarily pushing up the value of resale homes. I don’t want to purchase an expensive new construction home at this time because I’m competing with boomer buyers. When they sell their homes to go into nursing homes, it will create another housing crash in my opinion. I’m left with the option of just staying put in my starter home until the real estate market makes more sense.
Being skeptical of the market
According to USA Today, boomers have a median retirement nest egg of about $127,000 versus the $70,000 that Gen-X has and the $32,000 Millennials have. I believe all it will take is one small financial trigger to scare the boomers into creating a mass exodus from the stock market. They will want to preserve their $127,000 retirement savings if something major shakes the economy. No member of Generation X that I know wants to see his or her $70,000 meltdown to $30,000 as it did during the bear market. I’m being careful to leave at least a third of my retirement money in a money market.
Perhaps I’m wrong and the baby boomers will just gradually take money out of the market as they need it. Perhaps the me-generation will leave their money as an inheritance for their Millennial children. It’s also possible the earth is actually flat. Financial analysts, economists and sociologists can’t seem to agree on how the boomers will impact society or the economy in the upcoming 20 years. I think my generation just needs to be cautious so we don’t get caught up in a financial tsunami caused by the baby boomer’s great shift out of stocks and big houses.
More from this contributor:
Making the Leap from My Money to Our Money
$500,000 Isn’t The Magic Retirement Number
The Myth of the New Rich