system
Given the following post, respond as if you're commenting on Reddit:
human
What is meant when people say "when boomers will be retiring this decade, they will cash in their portfolios, causing a credit crunch"?

Peter Zeihan (among other writers) speaks about an oncoming "credit crunch" which goes like this - boomers are the largest population cohort. When they retire (and no longer have steady salary) they will "cash in" their portfolios (made mostly of stocks) into fixed-income securities retirees prefer like bonds.

When people retire, does the process of diverting capital from high-risk growth stocks into low-risk solid investments happen automatically by some pension fund? Does it always happen, or do some retirees keep their stocks? I'd love a higher resolution on this often mentioned topic when experts disucss the financial implications of changes in demographics.
gpt
Stocks empirically have significantly better returns than bonds IF you're able to sit out the volatility of stock valuations fluctuating up and down. That's a big if, and if you're young the general idea is that even if you take a 30% hit today on your net wealth this year, hang around for 5 years or so and that will recover comfortably. You'll probably be alive for another 50 years or more so why not.

If you're a retiree, you don't really have that luxury. You're nearing the end of your lifespan, so waiting 5 years just for your wealth to recover to where it used to be could be 50% of your remaining lifespan. In the meantime, you've got a lot more bills that need paying and no other source of income except your investments and savings. The prudent thing to do is to sell your stocks and buy safer investments.