Peak Savings: Wall Street Faces 20 Years Of Retirement Withdrawals As Boomers Hit 70 1/2

Tyler Durden's picture

The United States is a demographic time bomb, plain and simple.  Over the next 30 years, the U.S. economy will face an unrelenting demographic transition as ~75 million baby boomers exit the highest wage earning years of their life and start to draw down what little retirement savings they've managed to tuck away while wreaking havoc to the public "safety net" ponzi schemes, like Social Security, that will almost certainly be insolvent in a decade.

Per the U.S. Census Bureau, over the 30 years, the number of people in the U.S. over the age of 65 is expected to double while those 85 and up will triple.  Needless to day, the overall population growth of the United States is a fraction of that which means that millennials are about to get crushed by their it's probably a good thing they already live in mom and dad's basement.

US Population


In aggregate, per the Wall Street Journal, Boomers have saved $10 trillion in various tax-deferred saving accounts.  While that sounds like an impressive figure, with 75 million Boomers, it equates to an average of $133,000 per person which, needless to say, is insufficient to fund ~20 years of retirement. 

But while the Boomers, and by extension taxpayers, are facing a harsh future, Wall Street has made a killing in fees off of managing the ever growing balance of retirement accounts as Baby Boomers have come of age.  But that all looks set to change as America's aging population is forced by IRS regulations to take retirement withdrawals once they hit 70 1/2 years of age.

As illustrated by the chart below, over the past 2 decades Americans have consistently contributed more than they've withdrawn from tax deferred accounts, excluding recessionary periods.  But that all changed in 2013 and 2014 as the first wave of Boomers hit the magical age of 70.5 with a total of $25 billion of net withdrawals in 2014 alone.

Contributions to tax-deferred retirement plans outnumbered withdrawals through much of the 1990s and 2000s. That flow began to reverse as boomers entered their retirement years earlier this decade.


Investors pulled a net $9 billion from workplace retirement-savings plans in 2013, according to the Labor Department. In 2014 the withdrawals jumped to net $24.9 billion. Full-year information for 2015 from the Labor Department isn’t yet available, but large mutual-fund companies that manage the bulk of U.S. retirement assets say outflows continue to rise. Fidelity Investments expects 100,000 customers to take their first required distributions in 2017, up from 91,000 in 2016.


Still, distributions are expected to grow exponentially over the next two decades because of a 1986 change to federal law designed to prevent the loss of tax revenue. Congress said savers who turn 70 ½ have to start taking withdrawals from tax-deferred savings plans or face a penalty. Specifically, retirees who turn 70 ½ have until April of the following calendar year to pull roughly 3.65% from their IRA and 401(k) funds, subject to slight differences in the way the funds are treated by the Internal Revenue Service.



Moreover, mandatory withdrawals, as set by the IRS, grow exponentially as America's Boomers get older.  While mandatory annual withdrawals are only ~3.5% of assets at age 70.5, that number grows to 8% by age 90.  And even though it may not sound like a lot, 3.5% of $10 trillion is $350 billion worth of assets that would have otherwise been paying Wall Street a handsome annual management fee.

U.S. law requires anyone age 70 ½ or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay
taxes on those distributions.
The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.


The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.


Boomers hold roughly $10 trillion in tax-deferred savings accounts, according to an estimate by Edward Shane, a managing director at Bank of New York Mellon Corp. Over the next two decades, the number of people age 70 or older is expected to nearly double to 60 million—roughly the population of Italy.


Firms that manage 401(k) plans are trying to persuade clients to reinvest their withdrawals in other products rather than spending or donating the cash to charity. It’s another pain point for many traditional money
managers already struggling to keep some clients from shifting into lower-cost index-tracking mutual funds.




But don't worry Wall Street, the average millennial has a massive $1,000 nest egg saved up to help you fill those annual $350 billion gaps.

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wisehiney's picture

Highly deflationary.

knukles's picture

Nah.  The brokers will raise fees to compensate for declining asset balances in order to keep their upper 5% lifestyles by milking Ma and Pa Kettle from Dubuque so as to ensure the functioning of trickling down.

Skiprrrdog's picture

You mean, like, trickling down my leg?

OceanX's picture

Not to worry, they have a plan, keep eating the GMOs...

OfAllElaboratePlans's picture
OfAllElaboratePlans (not verified) OceanX Jan 16, 2017 8:10 PM

"Nah... The brokers will raise fees to compensate for declining asset balances in order to keep their upper 5% lifestyles by milking Ma and Pa Kettle from Dubuque so as to ensure the functioning of trickling down."


Nah.  The (((brokers))) will raise fees to compensate for declining asset balances in order to keep their upper 5% lifestyles by milking Ma and Pa Kettle from Dubuque so as to ensure the functioning of trickling down.


fixed it

DontGive's picture

Brokers will be broke.

Health "maintnance" and probate will eat their lunch.

If the offspring are lucky to inherit anything, most of it will vaporize.

max2205's picture

People over 85 will triple?  Ha ha LOL 

MalteseFalcon's picture

The corporate wing of the Republican party has a plan to save the brokers.

They want to hand the Social Security fund over to the brokers so they can siphon off commission and management fees.

Old folks are too smart for that.

Bush tried that and got his head shoved up his ass.

Trump is too smart to get let an important part of his constituency get hurt in this fashion.

Of course, corporate wing of the Republican party does not care about any constituency besides their donors.

But part of draining the swamp is dealing with the corporate Republicans.

Trump will turn the old folks loose on them.

And that will be that.

MalteseFalcon's picture

Wall Street owns members of both parties.


prmths2's picture

I'll believe it when I see it. Reince Priebus has no respect for senior citizens (Notice of Delinquency) and he is on Trump's staff.

MalteseFalcon's picture

Nothing is for sure.

Seniors need to hold the Republicans' feet to the fire on this issue.

shovelhead's picture

Whew, that's a relief,

I had visions of fund managers dying in the streets.

Ballin D's picture

deflationary on financial assets (counts against our savings) but inflationary for the things we need to survive (counts against our earnings).



Creative_Destruct's picture

Yes. The Central Bank pumped money WILL flow somewhere and inflate something. Most likely toward commodities required for staples. As always, excess liquidity flows to what's inflating (assets or commodities or housing/real estate) in self-reinforcing feed-back loops. If financial assets deflate, which I agree is likely to happen as boomers cash out assets  for retirement and withdrawl money, then something else will inflate.

Abitcoinbrain's picture

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets.[1][2][3] Price differentiation is distinguished from product differentiation by the more substantial difference in production cost for the differently priced products involved in the latter strategy.[3] Price differentiation essentially relies on the variation in the customers' willingness to pay[2][3] and in the elasticity of their demand.

XqWretch's picture

"millennials are about to get crushed by their it's probably a good thing they already live in mom and dad's basement."

At least they will save on the commute to crush the kids. Obviously bullish

J bones's picture

There is a bubble here. Once these withdrawals surface from the boomers and the market were to tank dont expect a reinvestment. By that point the boomers will say im retired now or very soon and its not worth the risk. Which will prolong the funds rebound. Majority of my coworkers are 50+ and chattering back and forth about where to put their funds before a public recession.

Raging Debate's picture

J Bones - Time to invest in boarding houses again. History rythmes. I'll take my chance in a room as an 80 year old geezer there than a piss smelling nursing home. I'll have a little more fun before I croak. There was this 80 something German dude at an upscale nursing home where I worked. His exercise was 2 mile walk a day. When the nursing home stopped letting him do it here died six months later. He screwed several old woman foggies and drank wine. He had fun until his freedom died. 


kareninca's picture

You are right; a vice-centric boarding house for ancient people would be a great business idea.

LyLo's picture

Not vice centric, life centric.

It was pulling teeth to get the nursing home to let my mother-in-law out for a smoke when we weren't there (literally just open the door--she could handle everything else herself) as smoking is sooooo bad for you.  They also got mad at us whenever we brought Mountain Dew.  (Terrible, terrible vices, right?  lol)

My mother-in-law had a rare type of brain cancer.  She was crippled before my husband graduated high school and had been given 6 months left max as an estimate by every doctor she saw for 15 years.... and they were worried about her washing a few smokes down with a can of soda.

I would have paid good money for a nursing home in the area that actually treated her like a human drawing her life to a close. 

Restorative_Ally's picture

What a bleak fucking future.

Bunga Bunga's picture

For a Ponzi scheme that was not unexpected.

lester1's picture

No worries. The trading desk at the NY Federal Reserve will be buying it all with unaudited electronic money to keep everything propped up.


Markets downtown go down anymore. They have all been socialized 

AliSONY's picture
AliSONY (not verified) lester1 Jan 16, 2017 8:16 PM


lester1's picture

I meant to say markets don't go down anymore.

AliSONY's picture
AliSONY (not verified) Jan 16, 2017 8:15 PM

This is a very hard hitting and truthful article.


But there are Lots of reasons for the markets to sell off. These so called pundits have been screaming bear market for years. That is one reason that. Lot of people on this board are now broke.


Only one analyst is calling markets correctly and they PROVE it by showing time stamped charts if their past calls.


Former analysts from Goldman Sachs have new group from about 30 years ago.

Been nailing markets.


LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) AliSONY Jan 16, 2017 8:30 PM

This mom’s basement dwelling, failed trader, now spammer, registered the following spam accounts to promote their scam. Please don't give him the satisfaction of seeing his site hit counter go up from ZH clicks. He's not very bright, but eventually he’ll go away if his spam scam doesn't bring income from ZH. The spam accounts are: AliSONY, Babs.St.Louis, Billy G, Chi Juan, Dr.Carl, ErikE, FemDayTrader, Irvingm, jasony, John Beau, KC Spike, MadhyaBharatx, MexInvest, MikeM54, Mon T, P Christmas Carole, Penny Trader, Pinky and the Brain, PUNE,  RoBERTAZ, Sonya B59, Stan Your Man, StevieTexie, Van G, Virginia Wooolf, wisetrader224, and xantippa

shovelhead's picture

He's so lonely in his villa in Monte Carlo that he wants to make you rich so you can join him.


AliSONY's picture

According to my calculations you have missed at least 50 others on ZH who discuss ShepWave

What is interesting is that I am sharing proof of their past analysis. You attack with abuse in the face of hard evidence

Any rational person would see what you are up to.


Kind of sad if your only retort is to slander rather than to deal objectively with evidence.


Typical liberal tactic



Go fuck your investment hat, Assinhoney.

Better yet, go duck hunting with Dick Cheney. 

Yours Truly, A Redneck Motherfucking Republican.  

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) AliSONY Jan 16, 2017 9:16 PM

Your spam post was not related to the article so their is no reason to discuss it.  I'd rather discuss why you registered so many spam accounts and spend so many precious hours spamming instead of trading.  Obviously your "amazingly accurate" trading system makes less money for you than your spamming system.  Lets discuss why spamming is so critical to your "company."

FRLEPU's picture

Did you read the article? Evidently not. Just more compounded speculation.


I do not care to argue with you. I liked the charts 


Hey if my comment got me in the A list then cool. I just make money. I like any analyst who shows proof of their performance it is as simple as that






Emergency Ward's picture

Even liberals recognize clip joint SPAM.

FRLEPU's picture

Those calls were amazing. Good that they show past real time charts. 


No one else on Zerohedge does that!



LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) FRLEPU Jan 16, 2017 9:14 PM

They just keep adding more spam accounts that keep posting the same thing.  

Good job of up-voting your other spam account, FRLEPU (member 2 weeks, 3 days). 

Yeah, shhh... nobody on ZH gets it that you're the same spammer...

LOL!  Dumb shit.

FRLEPU's picture

You make absolutely no sense.


Best regards and  thanks for the flattery. I feel like I am someone important now on ZH. Made it to the A list.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) FRLEPU Jan 16, 2017 9:33 PM

You keep up-voting yourself as well as making the exact same statements as your other spam accounts.  It's almost like there is one person in his Mom's basement doing the entire spam scam.



Makes complete sense.

friendly manitoba's picture

anyone that i know that has to collapse their registered savings plan pays 50% tax and reinvests the rest - no one spends it on a meal or a boat

lester1's picture

Every single market has been socialized by Central banks.  What's to stop them?

.300WinMag's picture

Someone needs WW3 / a financial system reset / one world Gov - b/c this construct is about played out....


The alternative is that the ship runs aground and the masses start pointing fingers and then get angry. Can not / will not, have that shit. I mean, those 8 fellers worked so hard to create a system wherein they ended up with more than half of what all of the other folks on the same rock have. It isn't like they are going to give that away to even it out. No, need to kill off a whole lot of 'useless eaters' and consolidate.

DennisR's picture

No prob. Print more money. Dow 50,000. Problem solved.

As Intended's picture

WRONG! There are only about 10 more years to go baby before the supporters of this scam retire.

Northern Lights's picture

Interesting point I never really thought of.  My own parents are in this boat.  Both in their mid 70's.  Lot's of cash and savings, not sure of what to do with it all.  GIC's pay shit.  They had it all in RRSP and they were forced to pull it all out at 70. Won't be surprised if the financial institutions will be allowed by Government to introduce some new RRSP plan to keep this money in the system.  I suspect it is so.

The Real Tony's picture

Likely the banks will end up taking everyones' money from bail-ins in Canada. The banks in Canada are the biggest house of cards backed up with total lies. That's why the deposit insurance has never been raised from a hundred grand which barely buys you a bag of peanuts today. The entire Canadian economy is set to unravel and a 50 cent dollar within 2 years' time.

chickadee's picture

DOW 20,000 could be a ceiling for a long time. DOW 1000 hurdle took from 1966-1982 to clear.

Mr_Potatohead's picture

As somebody who was born near the end of the baby-boom, I could see exactly how this probably would be addressed if HRC won the election.  The roadmap was first laid out in 2007 with ""  and it evolved into  " to be addressed"  Screwing up health care would accelerate the demise of the boomers, which would reduce long term costs and allow their retirement savings to be captured sooner for the greater good.  It's all laid out by Professor Ghilarducci, and Congress was listening to what she had to say.  Great scheme: convert 401K and IRA's into GRA's; force the money into US debt with interest rates above the fake official inflation rate yet below the real inflation rate; increase the mortality rate for seniors by screwing up health care; and then finally confiscate any balances in retirement accounts rather than allowing it to be passed on to heirs.  The election of DJT pushed this plan to the back burner for the time being.  Let's hope that DJT indeed makes America great again.  If he doesn't, this plan/scheme or something very similar or worse is coming sooner than you think.

Muad'Grumps's picture

I've for years try to wake yuppies up to this demographic bomb, but no, they have to max out their 401k contributions like a bunch of Walking Dead walkers. ERISA is THE LONG CON straight out of a David Mamet movie. 

They will change the rules on these tax-deferred plans. You really have to think that these ERISA plans have a tax lien. After seeing what they did to healthcare, what do you think they'll do with that big pot of money sitting in ERISA plans? 

Why Bother's picture

The funniest part about this alarmist article is that there were variations ten years ago, fearing boomers retiring at 62. Now it's 70 and a half. My sisters are in their late 50s and up to mid 60s and working (one of them says "until I drop") and I don't ever plan on retiring but will continue to produce and earn money, not because I have to but because I want to and I like my field. But most boomers saved very little. Quite many will be working into their 70s. Being productive and creative as long as possible is great for the economy and the stock market will have a smooth landing as most professionals will still be contributing to stocks in their 401ks and Roth accounts. Young people too. Harry Dent, in fact, predicted a major depression by 2010 and that did not happen. It's 7 years later. He was all about the boomer demographics but did not think they would continue working.

techpriest's picture

My own thought on it is, the bigger concern is still Social Security. I just heard on the Dave Ramsey show that ~11 million people are millionaires. Most of them are Boomers with a reasonably-funded retirement account. Meanwhile, HALF of Boomers have no savings.

If you look at that $10 trillion saved, I'm guessing most of it is in the ~10% of people who had been saving their whole life, and are sitting on $1-2 million. Example: 10% of Boomers = 7.5 million, and if they each have $1 million saved, that's $7.5 trillion of the $10 trillion total. The rest have little to nothing, and SS will not take care of them.

Politically, I expect a scream for redistribution when the SS benefits prove insufficient, and I do think retirement accounts will be in the crosshairs as a source of wealth. $10 trillion would cover half the debt after all.

If they don't seize it, I agree with you that people will continue working, and I don't think that's necessarily a bad thing.