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Because a large number of 401k plans are drawing upon stocks so that retired folk can live out their retirement. The boomers are retiring, and they're the firs

Because a large number of 401k plans are drawing upon stocks so that retired folk can live out their retirement. The boomers are retiring, and they're the first major group to retire under 401(k) program. They will be selling stocks and bonds (and whatever else they've invested into) and are no longer buying stocks with their end-of-career top-level paychecks.

EstesPark 3y ago
Does anyone have an actual breakdown of how much the younger generations are placing away in a 401k - if that's even possible?
- onlyrealcuzzo 3y ago
  401ks are like ~10% of the stock market: https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... Boomer 401ks are probably <5% of the stock market, and they aren't going to 0 overnight. The idea that boomer 401k withdrawals is going to crash the stock market or tamp out future growth is pretty strange. Defined benefit & defined contribution pension plans are both larger chunks of the stock market than 401ks. And all of those together are a smaller chunk than foreigner holdings.
  - goo 3y ago
    "The market is like a large movie theater with a small door. And the best way to detect a sucker is to see if his focus is on the size of the theater rather than that of the door." - Nassim Nicholas Taleb in Skin in the Game (This is not to say that you, specifically, are a "sucker", and I don't love the term. But I think Taleb has a lot to offer on considering risk.)
  - lotsofpulp 3y ago
    > Defined benefit & defined contribution pension plans are both larger chunks of the stock market than 401ks. 401k are a type of defined contribution retirement plan. https://en.wikipedia.org/wiki/Defined_contribution_plan https://en.wikipedia.org/wiki/Defined_contribution_plan
  - friend_and_foe 3y ago
    You're looking at market cap when you should be looking at volume. 5% of the stock market going liquid at a higher than ambient rate can reduce valuations by significantly more than 5%, possibly multiples more. And as we saw with interest rate hikes and bonds the past couple of years, something like that is a systemic risk and the fallout can easily cascade.
- ghaff 3y ago
  This article has one: https://www.fool.com/the-ascent/buying-stocks/articles/here-is-the-average-401k-contribution-rate-the-amount-may-surprise-you/ https://www.fool.com/the-ascent/buying-stocks/articles/here-... As you'd expect the contribution percentage increases with age (and the amount presumably increases even more). But even under 25s are at about 5% which is more than I would have expected though this is presumably just among people who have the option.
onlyrealcuzzo 3y ago
So why does this affect mainly consumer stocks?
HDThoreaun 3y ago
This explanation misses the point of the article which is that consumer stocks are broadly doing worse than the market.

EstesPark 3y ago

Does anyone have an actual breakdown of how much the younger generations are placing away in a 401k - if that's even possible?

onlyrealcuzzo 3y ago
401ks are like ~10% of the stock market: https://theirrelevantinvestor.com/2020/10/25/who-owns-the-stock-market/ https://theirrelevantinvestor.com/2020/10/25/who-owns-the-st... Boomer 401ks are probably <5% of the stock market, and they aren't going to 0 overnight. The idea that boomer 401k withdrawals is going to crash the stock market or tamp out future growth is pretty strange. Defined benefit & defined contribution pension plans are both larger chunks of the stock market than 401ks. And all of those together are a smaller chunk than foreigner holdings.
- goo 3y ago
  "The market is like a large movie theater with a small door. And the best way to detect a sucker is to see if his focus is on the size of the theater rather than that of the door." - Nassim Nicholas Taleb in Skin in the Game (This is not to say that you, specifically, are a "sucker", and I don't love the term. But I think Taleb has a lot to offer on considering risk.)
- lotsofpulp 3y ago
  > Defined benefit & defined contribution pension plans are both larger chunks of the stock market than 401ks. 401k are a type of defined contribution retirement plan. https://en.wikipedia.org/wiki/Defined_contribution_plan https://en.wikipedia.org/wiki/Defined_contribution_plan
- friend_and_foe 3y ago
  You're looking at market cap when you should be looking at volume. 5% of the stock market going liquid at a higher than ambient rate can reduce valuations by significantly more than 5%, possibly multiples more. And as we saw with interest rate hikes and bonds the past couple of years, something like that is a systemic risk and the fallout can easily cascade.
ghaff 3y ago
This article has one: https://www.fool.com/the-ascent/buying-stocks/articles/here-is-the-average-401k-contribution-rate-the-amount-may-surprise-you/ https://www.fool.com/the-ascent/buying-stocks/articles/here-... As you'd expect the contribution percentage increases with age (and the amount presumably increases even more). But even under 25s are at about 5% which is more than I would have expected though this is presumably just among people who have the option.

onlyrealcuzzo 3y ago

So why does this affect mainly consumer stocks?

HDThoreaun 3y ago

This explanation misses the point of the article which is that consumer stocks are broadly doing worse than the market.