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In June, the Wall Street Journal had a blaring headline that read: “Over the Hill: Retirees Yank 401(k) Funds.” The story went on to question the significance of the inflection point – the point at which new inbound money was now offset by a greater amount of money leaving these plans as boomers retire. Anyone is well into the article before reading that the money isn’t really leaving retirement plans. It’s just moving from a 401(k) to an IRA.

Like many numbers bandied about regarding 401(k) account balances, the researchers always manage to ignore the fact that, for example, the average 401(k) dollar amount per employee overlooks what has long since been rolled over. There’s no way to determine from government retirement plan figures what the typical employee may have stashed away in IRA’s spread around town like deer droppings after changing jobs every seven years on average.

A more meaningful source for anyone concerned about what this sea change means for retirement account values should pick up a copy of a fifteen-year-old book by Thornton Parker entitled, “What if Boomers Can’t Retire --- How to Build Real Security, Not Phantom Wealth.” The premise of this book is that stock values are propped up by phantom money --- the fact that all public stocks are valued based on the value of the most recent trade. This is the concept known as “marked to market” which values all of a company’s outstanding stock based on what the most recent purchase reflected. Warren Buffett says the same thing in a different way. He points out that stock prices are a voting machine while company balance sheets and income statements are a weighing machine.

Popular investment writers like Harry Dent proclaimed that the Dow Jones Average would be at 41,000 by 2008. This was in his book, “The Roaring Twenties Investor: Strategies for the Life You Want” which was written in the late ‘90’s. Other optimists too numerous to mention have written books with titles like Jeremy Siegel’s “Stocks for the Long Run” or James P O’Shaughnessy’s “What Works on Wall Street.” To not be an optimist is a bet against history, because, as Warren Buffett also points out, the DJA was at 50 in 1900 and it’s over 18,000 today.

More realistic assessments of what to expect from the stock market are offered by books like “The Vanguard Guide to investing During Retirement.” Books like this offer a dispassionate view of what can reasonably be expected without any promotional hype. For example, while long-term stock market average returns can reasonably be assumed to be about 10 percent per year, there are many ten year periods (since 1926) where the returns were significantly less --- by as much as four percentage points or more in 14 of the 62-year periods ending in 1999. The rolling ten year periods ending each year since 1999 have averaged about 8 percent --- including the so-called “Lost Decade” ending in 2010.

The concern of people looking down at all this from 30,000 feet is that the so-called millennials are not contributing enough to offset what boomers are selling to meet retirement living expenses. If the demand for stocks is falling because there are more than sellers than buyers, it can be problematic for those depending on stocks for their income in retirement as well as for protection from inflation. While stock prices may represent what Thornton Parker calls “phantom money” it’s not vastly different than any other kind of money. We learned in 2008 that even cash can have phantom qualities in some circumstances. It all depends on public perception and confidence. To their credit, however, companies actually have buildings, capital equipment, hard-working employees and a flow of income. Sooner or later this combination gets reflected in stock prices. The “game,” if we want to call it that, has been around since the 1600’s, and while not perfect, it is one of the better arrows in our quiver when combined with bonds and real estate.