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PaperclipPerfector  4d ago (text post)   2081 thread views

Small-Scale Question Sunday for May 25, 2025

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Do you think in the coming years the higher ratio of older people cashing out 401k's etc vs younger people contributing will put constant, unrelenting downward pressure on stock prices? Or is that a drop in the bucket compared to other factors in the market?

This has already happened in Japan- has their stock market been in perpetual decline?

The Bank of Japan has been buying Japanese stocks for many years. https://www.pionline.com/markets/bank-japan-becomes-nations-biggest-stock-owner

It has been pretty terrible since 1989. The Nikkei peaked in late 1989 and declined 80% from then until 2003. Only recently did it hit the 1989 ATH again.

Not sure about to what degree demographics was to blame.

It had been treading water for decades post 80's bubble, the Nikkei only recently achieved a new all time high since then (in nominal terms).

Why will there be a higher ratio than before?

Demographics: an aging population has a higher ratio of retirees.

Demographic shift of Boomers moving into retirement, lower birth rates

I thought so.

It's complicated. It's not like they'll all just sell all their stocks just because they've retired. Stocks can be inherited. A solid amount of the wealth will pass on to younger people. But the boomers may convert some of the equities into fixed incomes instead. And then there's Required Minimum Distribution (RMD). There will be obligatory withdrawals from tax-advantaged accounts.

So there will be headwind. How many percent worth of headwind, I have no idea. Can't see it being unrelenting downward pressure unless there's loads of bad shit and few good things going on at the same time.

Isn't it pretty common for retirement savings being tied up in stocks, and other wealth in real estate?

A lot of wealth will be passed on to younger generations but that isn't primarily stocks, for the broad middle class anyway.

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