The 401(k) is the greatest gift ever given to Wall Street. 

As you may know, the main benefit of a 401(k) is that it defers taxes on some of your income until you reach a certain age. This is a massive advantage that can easily add $200,000+ to your net worth by the time you retire. And as you can see here, Americans have poured in trillions.

Assets in 401(k) accounts have ballooned to an incredible US$5.3 trillion. For context, this is bigger than the annual economic output of the U.K. and France combined. 

And more importantly, it's equal to nearly one fifth of the value of the entire U.S. stock market. 

More on this key fact in a minute.

Chances are you or your parents belong to the “baby boomer” generation. Baby boomers are Americans born between 1946 – 1964. Today baby boomers range in age from 54 – 72. 

Baby boomers are BY FAR the richest generation in world history. Their net worth is estimated at around $30 trillion. They control 70% of all disposable income in America, and own 80% of all money deposited in American banks. 


Importantly, boomers accumulated this wealth in a way no other generation had done before. They invested huge sums of cash in the stock market, largely through retirement accounts. 

In 1982 the average baby boomer turned 28. For the next 30 years they would enjoy “peak earnings” – the period of life when your career takes off and you make the most money. 

The year 1982 also gave birth to the most powerful bull market America had ever seen. In August 1982 the S&P 500 sat at a level of about 100. In the next 18 years it would surge a stunning 1,400%. By 2000 the S&P peaked above 1,550, capping off the greatest American bull market of all-time. 

Sharp historians will note that this period included “Black Monday” in 1987. Stocks dropped 22.6% that day, by far the market’s worst day in history. 

But looking back, Black Monday was barely a speed bump. Not even the worst day in stock market history could inflict lasting damage on this unstoppable bull. Stocks finished 1987 up 5.7%, and by 1989 had achieved new record highs. 

In fact, during this 18-year run, stocks rose every year but one: 1991, when the S&P slipped just 3%. 

Just look at this unstoppable monster of a bull market. 

Why was this bull market so strong… so relentless… so invincible? 

Some folks credit “Reaganomics” from the 80s. Others point to the prosperity of the 90s. 

These folks fail to see the big picture. 

What made this bull market unique was the behavior of baby boomers. Never in world history had a group of people poured so much money into the stock market so consistently. 

Recall how 401(k)s work. They induce us to invest a chunk of our paychecks into the market every two weeks on payday. It doesn’t matter if the market is surging, crashing, or standing still. Every two weeks, without fail, tens of millions of Americans automatically pour cash into the stock market by way of their 401(k). 

For thirty years, the richest generation in history fed the stock market a never-ending river of cash, fueling the greatest boom in history. 

Then in 2000, this boom smacked into a brick wall. 

It gave way to a 50% stock market crash known as the 2000 – 2002 bear market.

"Interestingly enough, 2000 is when the first baby boomers started retiring. When they started retiring, suddenly there were some sellers of stocks. Before that, everybody had been buying stocks every single month in their 401(k)."

Unfortunately, 2000 gives us a glimpse of what’s to come when baby boomers retire in large numbers. 

And the thing is, this is happening right now. 

3.9 million boomers are set to retire in 2018. And as you can see from this chart, that number will grow every year until 2023.

Instead of pouring money into the stock market, boomers are now draining money from the stock market. They’re selling their stocks to pay for retirement. 

In other words, the driving force behind history’s greatest bull market has been thrown into reverse. 

© Copyright 2018 Real Vision

Here’s what it looks like on a chart: 

In part two, we’ll explain why your retirement is in jeopardy no matter what age group you're in...and what you can do protect your money. 

Keep a look out for an email from Raoul, giving you access to part two. You will also be sent a free eBook at the end of the series, containing the full story on the looming retirement crisis.   

Author: Raoul Pal 

CEO and co-founder of Real Vision, Raoul Pal, is a Goldman Sachs alumni and ex-hedge fund manager from GLG, with over 27 years’ experience in the financial markets. Raoul also writes and publishes an elite macro- economic and investment service called Global Macro Investor (GMI) for the world’s leading hedge funds, pension funds, banks and sovereign wealth funds.

What changed in 2000? Here’s Real Vision CEO and co-founder Raoul Pal:

ON THE WEB

Desktop, tablet and mobile

Real Vision is a full on-demand financial TV channel for investors, featuring several ground-breaking series including original documentaries, deep interviews with the world’s most famous investors, discussions on the investment themes that really matter, actionable trade ideas, technical analysis, trading psychology and much more.

Author: Raoul Pal 

CEO and co-founder of Real Vision, Raoul Pal, is a Goldman Sachs alumni and ex-hedge fund manager from GLG, with over 27 

years’ experience in the financial markets.

If you’re like most American workers, you’ve participated in a 401(k). Every two weeks on payday, your employer holds back some of your pay and invests it in the market for you. Many employers will “match” part of this contribution, meaning they invest some of their money in the market for you too.

Note who never touches this money: you. The 401(k) arrangement siphons cash directly from your paycheck to Wall Street every two weeks. For Wall Street, what could be better?

Chances are you or your parents belong to the “baby boomer” generation. Baby boomers are Americans born between 1946 – 1964. Today baby boomers range in age from 54 – 72. 

Baby boomers are BY FAR the richest generation in world history. Their net worth is estimated at around $30 trillion. They control 70% of all disposable income in America, and own 80% of all money deposited in American banks. 

ON THE GO

Apple iPhone &iPad | Android

Apple TV | Chromecast
Fire TV (coming soon)
Roku (coming soon)

ON YOUR TV

Importantly, boomers accumulated this wealth in a way no other generation had done before. They invested huge sums of cash in the stock market, largely through retirement accounts. 

In 1982 the average baby boomer turned 28. For the next 30 years they would enjoy “peak earnings” – the period of life when your career takes off and you make the most money. 

The year 1982 also gave birth to the most powerful bull market America had ever seen. In August 1982 the S&P 500 sat at a level of about 100. In the next 18 years it would surge a stunning 1,400%. By 2000 the S&P peaked above 1,550, capping off the greatest American bull market of all-time. 

Sharp historians will note that this period included “Black Monday” in 1987. Stocks dropped 22.6% that day, by far the market’s worst day in history. 

But looking back, Black Monday was barely a speed bump. Not even the worst day in stock market history could inflict lasting damage on this unstoppable bull. Stocks finished 1987 up 5.7%, and by 1989 had achieved new record highs. 

In fact, during this 18-year run, stocks rose every year but one: 1991, when the S&P slipped just 3%. 

Just look at this unstoppable monster of a bull market.