2025: And So It Begins -- The Bow Wave -- The "Peak-65 Zone" -- December 27, 2024

Locator: 44552BOWWAVE.

Record wave of new 65-year-olds in 2025. 

Link here. 

This is a huge story, but to some extent, they're jumping the gun. 

Yes, 2025 may be the  leading edge of the bow way of Baby Boomers moving into retirement, but because the age for mandatory RMDs from retirement accounts -- to include the federal government's "401(k)" -- the Thrift Savings Program -- which includes postal carriers and the military -- has now been delayed to age 67 and in a few years to age 70 -- even bigger sums of money will be moving out of retirement accounts two years from now. 

From the lede:

About 4.2 million people in the U.S. are forecast to cross that age threshold next year.

This could represent the height of what is termed the “peak 65” zone, a period of years from 2024 to 2027 in which more than 4.1 million will hit that age level each year.

For financial-services firms, that likely means more demand for investments that can help people close the income gap they expect from not working.

That can be as simple as putting their cash into higher-yielding vehicles, such as money-market funds. Already, investors’ close attention to cash yields is a challenge for banks and brokers accustomed to supercheap deposits.

The phrase "... that can help people close the income gap they expect from not working" caught my attention. Any financial advisor that writes that is also the financial advisor that will recommend a traditional IRA over a Roth IRA .

There is a number of those reaching the "peak 65" zone over the next four years that won't need the RMD income to close the income gap once they stop working. I haven't seen the number or the percent of folks that fall into that category but I'll bet it's not trivial. 

Many folks in the "peak 65" zone will have more disposable income than when they were working. 

[By the way, this may help explain the huge build in money market funds, another topic about which I find little explanation on the business pages of newspapers. But that's a story for another day.]

A lot of those folks will take cruises but a lot of the won't. A lot will plow there RMDs right back into investments, and to the best of my knowledge the only completely tax-free investment is the "529." 

I didn't find the article particularly useful but at least someone is starting to write about the "peak 65" zone.

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