Sunday, June 22, 2003

Side Effects of the Baby Boom-Cashing in the 401(K)sMegan's tag-team partner Mindles Dreck has a good post on one of the side effects of the Baby Boom approaching retirement; when the boomers cash in their 401(K)s and IRAs, they'll have to pay taxes on them, mitigating the burden that their collective sucking on Social Security will bring. Financial people have thought about the effects of the Baby Boom hitting retirement for a while. The effect on Social Security is well known, but thought has also been given to the effect of the boomers starting to sell off their stock and bond holdings in order to finance the nice home in Shady Lanes Estates (55-and-older) rather than the trailer park abode. The thought for a while has been that the effect of the boomers hitting retirement would be a depressed capital market, as all the supply of boomer stocks and bonds getting cashed in will help crash (or at least slow the growth) of the financial markets. The studies that Mr. Dreck points out take that analysis of long standing a step further; assuming that the money's not in a Roth IRA, where investment income is tax-free, the oldesters will have to start paying taxes. When the boomers start hitting retirement, expect the AAPR issue of the day to be special tax treatment for withdrawls from tax-deferred retirement accounts.

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