Rich Dad Poor Dad author Robert Kiyosaki has urged investors to ditch the U.S. dollar and buy bitcoin alongside gold and silver. He warned that “baby boomers’ retirements are going broke as paper assets crash.” The famous author stressed: “I do not trust anything that can be printed.” Robert Kiyosaki’s Latest Warnings and Advice The […]
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When it comes to the baby boomers’ run of investing luck, timing has been on their side.
Decades of stellar stock-market returns produced by a series of bull markets that began in 1982 coincided with boomers’ prime working years and made their nest eggs grow.
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As institutional interest in Bitcoin grows, Fidelity and BlackRock’s proposed spot Bitcoin Exchange-Traded Fund (ETF) faces an unexpected hurdle: the crypto market’s unwillingness to let go of the coin at bargain prices.
According to Mike Alfred, who claims to be a value investor and a board director, the market will “unlikely” allow BlackRock to purchase BTC below $60,000. Taking to X on December 4, Alfred said BlackRock and other Wall Street players keen on issuing spot Bitcoin ETFs would have to “buy for Boomer’s 401k plans for at least $60,000.”
This preview stems from the rapidly growing demand among institutional investors, as seen by the number of Wall Street players willing to issue complex derivatives tailored for, among other investors, “baby boomers,” most of whom are “approaching retirement.” With their substantial retirement savings, baby boomers increasingly recognize BTC’s potential as a hedge against inflation and a store of value.
Following Federal Reserve intervention during the COVID-19 pandemic, inflation rose to multi-year levels in 2021. To preserve purchasing power, the central bank began hiking interest rates. Although inflation has fallen and the economy stabilized, it remains higher than the target of 2%. The Fed continues to track this metric and may further intervene by raising rates to lower inflation. This might impact Bitcoin prices, as seen in the past months.
Nonetheless, the potential influx of boomer money into Bitcoin via a Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) approved derivatives product is a big boost for the coin. Though the SEC has yet to authorize multiple spot Bitcoin ETFs, the crypto and Bitcoin market expects the strict regulator to greenlight the first product in the next few weeks.
Accordingly, ahead of this milestone development for the Bitcoin and crypto market, Alfred thinks BlackRock, Fidelity, and other players won’t secure Bitcoin at spot rates. Instead, the market anticipates that BlackRock, one of the world’s largest digital asset managers, will make their “bi-weekly purchases at prices above $60,000.”
The coin is trading at April 2022 levels, ripping above $40,000 over the weekend as bulls step up. Looking at the BTC candlestick arrangement on the daily chart, the first clear resistance is around $48,000.
The coin trades within a bullish breakout formation following gains above $32,000. As buyers step up and investors anticipate the SEC approving the first batch of spot Bitcoin ETFs, the coin will likely continue increasing toward all-time highs of around $70,000.
Feature image from Canva, chart from TradingView
The unlucky (and sad) millennial housing story may be getting tedious and repetitive, but maybe millennials have reason to be upset. Just consider this, they’re constantly getting crushed in the housing market, and boomers keep coming out on top. Even one of the biggest investment banks on Wall Street thinks so.
There’s been a “massive wealth transfer from the public to the private sector,” Bank of America Research strategists led by Ohsung Kwon wrote in a new note, resulting from two things: Government debt has risen from 31% of the gross domestic product to 120%, from 1980 to today, and 10-year treasury yields had gone from 12% to 4.6% at the time of writing (the 10-year treasury was sitting at 4.9% as of press time). Add it all up and household wealth increased from $17 trillion to $150 trillion, a record high.
The winners of this great wealth transfer? Baby boomers—and they especially won the housing market. They and the “traditionalist” generation hold two-thirds of total net worth, BofA said, and boomers alone hold more than half of all wealth, the majority in financial assets, including real estate.
To be sure, when boomers were entering the housing market in the 1980s, mortgage rates were extremely high, peaking at roughly 18% as Federal Reserve Chair Paul Volcker attempted to lower inflation that was raging at 14%. But, boomers have by now had many years to refinance their mortgages as rates fell, and they did just that, leaving the vast majority of them with mortgage rates below the current market rate.
In a replay of sorts of the 1980s, inflation hit a four-decade high in June of last year, and the Federal Reserve has since raised interest several times as chair Jerome Powell has adopted a Volckerian strategy. With that, mortgage rates that were hovering around 3% throughout the pandemic-driven housing boom skyrocketed, reaching 8%, a more than two-decade high. Currently, the 30-year fixed rate is just below 8%. This means, BofA notes, that as before mortgage rates escalated, many homeowners locked in low rates—just not millennials.
“Everyone locked in 3% mortgage rates, except Millennials,” the bank said. “On the cost side, most Boomers locked in low mortgage rates, where the effective mortgage rate remains below pre-COVID levels. The only group that took out mortgage debt meaningfully since 2021 is Millennials, seeing a 20% jump.”
Nearly all outstanding borrowers have below-market mortgage rates, fueling the so-called lock-in effect or the golden handcuffs of mortgage rates. To put it simply, would-be sellers aren’t selling, in fear of losing their low rate. That’s putting a strain on supply, which is already tight given the housing market is underbuilt. With that, existing home sales have already fallen to their lowest level since 2010, by one measure, and could fall further to their lowest level since the early 1990s, according to a separate forecast.
So, consider this, a mortgage rate shock, limited supply, and home prices that rose substantially during the pandemic-driven housing boom have all left millennials in likely the worst position than any other generation, so far.
For one, homeownership is much lower for younger generations. Those under 35 make up less than 40% of homeownership by age group; those 35 to 44 make up over 60%; those 55 to 64 make up over 70%; and those older than 65 make up slightly below 80%.
Additionally, affordability has decreased significantly since 2021, Bank of America said, citing the National Association of Realtors’ affordability index. It’s clear that mortgage rates jumping in such a short period of time coupled with home prices that are still high, and in some markets are continuing to rise, has deteriorated affordability to levels worse than at the height of the housing bubble.
“Boomers have certainly not felt the impact of higher rates as much, and we believe many wealthy Boomers are actually benefiting,” the bank wrote.
And, they’re definitely spending. Bank of America’s data, strategists wrote, show that boomers and traditionalists (also known as the silent generation) are the only groups that are increasing their consumption; they also make up 40% of total consumer spending.
“Boomers typically spend less on big ticket items (housing and autos), but spend more on health care, home improvement and slightly more on entertainment,” Bank of America said. “As ultra-low rate mortgages incentivize people to live in their homes longer, we could see increased home improvement spending by wealthy Boomers.”
Meanwhile, younger generations are bearing the brunt of higher interest rates, given their spending has fallen and their credit card delinquency has risen, the note read. Younger Millennials, ages 30 to 39 are the only group with higher credit card delinquency today versus pre-pandemic levels. Still, millennials as a whole, are spending more on housing—potentially because of increased housing costs. Although, we could be in the midst of the next great wealth transfer.
“Housing could struggle given higher rates, but the wealth transfer from Boomers to Millennials is supportive, especially for luxury housing,” the bank said.
This story was originally featured on Fortune.com
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When it comes to stocks, investors face a big question: How much exposure is enough?
For investors already in retirement, how well they answer that question may have big consequences for how well they reach their goals.
“About 37% of boomers have more equity than we would recommend for their particular life stage,” said Mike Shamrell, vice president of thought leadership at Fidelity Workplace Investing.
Baby boomers — who are currently 59 to 77 years old and typically already in or near retirement — face tight time horizons for when they need to draw from their nest eggs.
Some boomers may be tempted to take on more risk due to guaranteed income from pensions or Social Security checks that cover their expenses. Others may be driven to try to make up for lost time if they feel their portfolios have fallen short of what they need.
At Fidelity, the allocations to equities in retirement funds are about 10% higher than where they should be, Shamrell said. The firm’s conclusion is based on comparing investments with the equity allocations it recommends in its target date funds, which provide a mix of investments according to specific retirement-age goals.
The good news for almost half of boomer investors — 48% — is their allocations are on track, according to Shamrell.
Some of those investors with excess stock exposure may simply need to rebalance after recent market highs, Shamrell said.
Experts say having the right mix of equities can go a long way toward helping retirees meet their financial goals.
“Everybody should have at least some equities,” said Carolyn McClanahan, a certified financial planner and founder of Life Planning Partners in Jacksonville, Florida. She is also a member of CNBC’s Financial Advisor Council.
Yet, there are some important factors to consider when gauging the right investment mix and adjusting those allocations as necessary along the way.
When meeting with clients, financial advisors typically come up with an investment policy statement, which outlines the investing goals and asset allocations needed to get there.
Importantly, a client’s personal circumstances drive these goals, McClanahan noted.
Clients typically fall into one of three groups: those who have more than enough money for retirement; those who are close to having enough, but who need to carefully manage their investment risk; and those who are not prepared.
For the latter group, McClanahan typically advises working longer and making spending adjustments.
Everybody should have at least some equities.
Carolyn McClanahan
founder of Life Planning Partners
For the middle group, who are close to enough, crafting a careful investment strategy is essential, she said. Importantly, that may mean curbing the instinct to take on more risk to catch up.
“Sometimes people feel like, ‘If I make more money, I’ll be able to spend more money and do better,'” McClanahan said.
“We have to show them the downside risk of that — you can likely lose a lot more money and then you’re not going to be OK,” McClanahan said.
Carl Smith | Getty Images
To pinpoint your ideal level of exposure to stocks, there are two important factors to consider: your ability to take on risk and your time horizon.
“No one can predict with any level of certainty how long you’re going to be around,” said Sri Reddy, senior vice president of retirement and income solutions at Principal Financial Group.
“There are plenty of people who are 80 or 82 today who will go on for another 20 years,” he said.
Consequently, not investing in equities is “not prudent,” he said. That goes not only for a 20-year time horizon, but also for shorter five- or 10-year time frames.
Though time horizons cannot be pinpointed precisely, investors can decide how much risk in the markets they can and should stomach.
Most of McClanahan’s clients who are in their 70s have a 40% stock allocation, she said.
However, the ideal level of exposure depends on their goals and risk appetite. While some investors may welcome a 40% stock allocation to grow the money they hope to leave to their children, others may be more comfortable with just 20% in equities so they can preserve their money for the same goal, McClanahan said.
Equity exposure should be appropriately diversified, such as through a mix of U.S. large cap and small cap, international large cap and small cap low-cost passive funds, McClanahan said.
Retirees who feel they are appropriately invested may want to dabble in stock picking with a small sum. But McClanahan cautions that kind of activity may have unintended consequences, particularly following recent market highs.
One of the most important ways to make sure you’re going to do well in retirement is good tax management.
Carolyn McClanahan
founder of Life Planning Partners
One client recently used $30,000 to invest in stocks, got lucky in the markets and sold to preserve her gains, McClanahan said.
But that move left the client with $8,000 in short-term capital gains she had to pay taxes on at regular — rather than lower long-term — rates, she said.
What’s more, that additional income may prompt the client to have to pay higher rates on Medicare Part B premiums.
“One of the most important ways to make sure you’re going to do well in retirement is good tax management,” McClanahan said.
marekuliasz | iStock | Getty Images
Experts caution there are other downsides, particularly when it comes to market timing, or buying and selling based on the market’s ups and downs.
“Even missing some of the best days in the market could lead to poor returns,” said Nilay Gandhi, a CFP and senior wealth advisor at Vanguard.
To illustrate the point, Gandhi said he tells clients, “After a hurricane comes a rainbow.”
The reason trying to time the market does not work is many people tend to get the timing wrong both when they buy and sell, Reddy said.
As a result, it’s hard to get a return that’s meaningful.
“Staying the course or staying disciplined is usually your best friend,” Reddy said.
Between soaring inflation, rising interest rates, and declines in the bond and equity markets, many Americans’ finances took a beating in 2022. So much so that the average retirement account balance fell by 20% compared to 2021, according to a report from Vanguard. Still, many investors remained “resilient” through the uncertainty, the company contends.
Average account balances fell from a record-high of $141,542 at the end of 2021 to around $112,572 last year, while the median balance fell from $35,345 to $27,376, according to Vanguard’s How America Saves report for 2023. The report analyzes trends among over 5 million defined contribution plans (such as 401(k)s) that Vanguard manages.
Read more: Top savings tools: 4 alternatives to savings accounts
Of course, the figures vary significantly depending on factors like age, profession, income, etc. The average is skewed by a small percentage of older accounts held by wealthier workers, making the median balance more representative of the typical worker.
“Not only does income, on average, tend to rise somewhat with age, making saving more affordable, but older participants generally save at higher rates,” Vanguard’s report notes. “Also, the longer an employee’s tenure with a firm, the more likely they are to earn a higher salary, participate in the plan, and contribute at higher levels.”
The average balance is highest, then, for those aged 65 or older, at $232,710 (the median is $70,620). Here’s how it breaks down for other ages:
Age 55 to 64: Average balance $207,874; median balance $71,168
Age 45 to 54: Average balance $142,069; median balance $48,301
Age 35 to 44: Average balance $76,354; median balance $28,318
Age 25 to 34: Average balance $30,017; median balance $11,357
Age 25>: Average balance $5,236; median balance $1,948
There is also a difference between how much men and women are saving. Though women tend to save more than men at every income level, they earn less on average than men. So male investors—which make up 56% of Vanguard participants—had an average account balance of $136,977 at the end of 2022, compared to $95,570. The median account balance for men was $34,961, compared to $24,714 for women.
Despite those bleak headline numbers, there are some promising trends in the report. The average participation rate, or the share of employees actually contributing to their retirement account, is the highest it’s been in the 22 years Vanguard has been publishing the report at 83%, meaning more and more people are saving for retirement.
The deferral rate, or how much participants are contributing, stayed relatively stable compared to the previous few years, with the average Vanguard participant investing 7.4% of their income in their retirement account, and the median participant saving 6.4%. Compared to 2013, the deferral rate has increased slightly.
And thanks to ongoing contributions, account balances are still up compared to a few years ago. For those who had an account in both December 2017 and December 2022, the median account balance was 70% higher in the latter.
A report from Alight that analyzed around 3 million investors’ retirement accounts found similar trends. Account balances were down, but “most participants resisted the temptation to make knee-jerk reactions when it came to their investments,” the report reads. But only 3% of participants paused their contributions.
That’s the right move, experts say. Investing for retirement is a long game—one year of declining value doesn’t matter as much as ensuring you stay invested for a long time. That way, your investments have the chance to rebound and compound.
“The people who struggle with investing often make mistakes when they chase returns, jump from one investment to another based on the performance of the year before,” Faron Daugs, a certified financial planner at Harrison Wallace Financial Group, previously told Fortune. “It’s really about being disciplined and continuing to invest in all different types of markets, not trying to time the market.”
This story was originally featured on Fortune.com
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