79 Million Boomers Begin Retirement…Now

My friends and colleagues in the investment management business should realize that the most important determinant of their success over the next decade is the type of mousetrap they have to offer the retiring Baby Boomer generation.

According to USA Today, there are approximately 79 million boomers in the American populace and the first wave of them turn 65 in the next year.

Wealth managers, brokers, investment advisors, financial planners, and family office guys will all feel the effects of this retirement onslaught, but nowhere on The Street will it be felt more than in the mutual fund complex.  John Waggoner writes:

The Baby Boom began in 1946 and stretched through 1964. The mutual fund industry has grown up with Boomers. In 1971, when the first Boomers turned 25 and began to enter the workforce, the fund industry had $55 billion in assets. It’s now a $10.7 trillion behemoth, $4.1 trillion of which is in retirement accounts, according to the Investment Company Institute, the funds’ trade group. About 42% of mutual fund IRA money is invested in U.S. stock funds, as are 46% of assets in mutual fund defined-contribution plans such as 401(k)s.

Will the boomers be content to “stay the course” and just count on actively managed mutual funds or low-cost indexing options as they have for decades?  Something tells me that another decade for stocks like the one we’ve just had will make these traditional options much less “default” than they’ve been in the past.

The ten year treasury is now yielding less than most blue chip stocks and many of these stocks are trading at historically low price-to-earnings ratios…will the boomers opt for the (perceived) additional risk of the 3.5%-yielding blue chip equity mutual fund?  Or will bonds remain the focal point for those staring their last years of working in the face?

The main question we in the business must ask ourselves is whether or not our product and management offerings are geared toward what the boomers will actually be looking for as “peak earning years” turn into “golden years”.

From conversations I’ve had over the years with clients of that generation, I know that liquidity will matter a lot to them and that returns will begin to matter less than longevity of funds.  This group doesn’t expect to pass in their early 70’s and they certainly don’t expect to be burdensome to their children – in fact, just the opposite; the boomers wish to be the most active grandparents imaginable for their kids’ kids.  In my opinion, this means more disposable income in retirement than for previous generations of retirees.

As 79 million Americans begin to hang ’em up, these questions become unavoidable.  I’m making them a priority for my practice now.

Get ready investment pros, it’s coming.


How Will Baby Boomers Retirement Affect Stocks (USA Today)

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