The recent volatility in the stock market, along with what appears to be a sagging economy, has led a lot of people to believe that the crash of 87 is an event likely to repeat. Of course, given a flimsy economic stimulus package and one day of positive gains on the stock market, many people are already saying this crisis has been averted.

Short term predictions are mainly a guessing game. There are just too many variables to accurately say what the stock market may do in the next days or weeks. Longer term trends are easier to read and thus make more accurate predictions.

One line of thinking on the long term prosperity of the stock market comes from Robert Kiyosaki (Author of the Rich Dad/Poor Dad series of books) and warrants your attention. The premise of his book, Rich Dad’s Prophecy, boils down to this: Mandatory withdrawals from retirement accounts are going to cause a major downturn in the stock market in the next decade.

His rationale is well researched and highly believable. Here’s the summary: Stocks go up when there are more buyers than sellers and down when there are more sellers than buyers. Fair enough. Mandatory withdrawals from retirement accounts will force retirees to sell a portion of their stock (or mutual funds which invest in stocks). The sheer number of baby-boomers reaching the mandatory withdrawal age will far outweigh the number of younger workers buying stocks in their own retirement accounts. More sellers than buyers means prices go down.

A similar phenomenon caused baby-boomers to ruin pension accounts for those still in the workforce. That happened as they started to retire and the stock market decline will occur when they hit the mandatory withdrawal age. That will happen when then reach 70, which will begin in the year 2016. That will likely be the start of a long term slide in the stock market. It might not be an overnight crash, like those that have preceeded it, but it will certainly have a negative effect.

There will likely be many ups and downs in the market before 2016, and that’s not a date that is set in stone. Other factors could influence when, and if, this really becomes the major problem that it has the potential to be. That means that the stock market shouldn’t be avoided. In fact, you may want to get in and make your gains before things head south. The effect of mandatory withdrawals on the overall market is certainly something to keep in mind when making long term investment plans.

There’s more to the book then just what was discussed here, and this topic is discussed in much greater detail. The book is certainly worth the read and can be purchased on Amazon through the following link.