This is an interesting article put out by, I think it’s why secondary markets like Palm Springs will do well as baby boomers retire and sell their primary residences and downsize.

Here’s what they have to say:

The largest generation in U.S. history has to start pulling its retirement money this year, kicking off a mandatory movement of cash that could total hundreds of billions in the coming decades.

U.S. law requires anyone age 70 1/2 or older to begin annual withdrawals from their tax-sheltered retirement accounts and pay taxes on those distributions. The oldest of the nation’s 75 million baby boomers cross that threshold for the first time this month, according to a U.S. Census Bureau estimate of when that demographic group began.

The obligatory outflows from 401(k)s and IRAs are expected to ripple through the U.S. economy, the stock market and a money-management industry that relies heavily on fees from boomers’ tax-sheltered savings plans and assets.

Boomers hold roughly $10 trillion in tax-deferred savings accounts, according to an estimate by Edward Shane, a managing director at Bank of New York Mellon Corp. Over the next two decades, the number of people age 70 or older is expected to nearly double to 60 million—roughly the population of Italy.

Firms that manage 401(k) plans are trying to persuade clients to reinvest their withdrawals in other products rather than spending or donating the cash to charity. It’s another pain point for many traditional money managers already struggling to keep some clients from shifting into lower-cost index-tracking mutual funds.

Many hope to offset the required distributions with inflows from millennials, people in their 20s and 30s—who recently became the largest living generation, even though boomers, at their peak, were more populous.

Savers, meanwhile, are debating what to do with their cash as they wrestle with tax bills triggered by required distributions and worry about outliving their assets. On average, men and women who turned 65 in 2015 can expect to live another 19 and 21.5 years respectively, according to the U.S. Social Security Administration’s most recent life-expectancy estimates; those post-65 expectancies are up from 15.4 and 19 years for those who turned 65 in 1985.

Jack Weaver, a retired biopharmaceutical product developer, turned 70 in late 2015 and had to pay taxes on his first required payout of $31,000 last year. “It’s unwanted income,” he said. He reinvested the money, and says his wife plans to do the same when she takes her first distribution this year.

The rise of the 401(k) is inextricably linked with the surge in U.S. citizens born after the end of World War II. Boomers, defined by the U.S. Census Bureau as people born in the 18 years beginning in “mid 1946,” embraced tax-deferred retirement accounts and made them a widespread savings tool in the 1980s and 1990s. The plans largely replaced traditional pensions, and helped create a multi-trillion-dollar industry supporting hundreds of investment firms and financial planners.

Contributions to tax-deferred retirement plans outnumbered withdrawals through much of the 1990s and 2000s. That flow began to reverse as boomers entered their retirement years earlier this decade.

Investors pulled a net $9 billion from workplace retirement-savings plans in 2013, according to the Labor Department. In 2014 the withdrawals jumped to net $24.9 billion. Full-year information for 2015 from the Labor Department isn’t yet available, but large mutual-fund companies that manage the bulk of U.S. retirement assets say outflows continue to rise. Fidelity Investments expects 100,000 customers to take their first required distributions in 2017, up from 91,000 in 2016.

The withdrawals thus far are small when compared with the roughly $15 trillion parked in U.S. tax-deferred retirement plans, according to a September 2016 estimate by the trade group Investment Company Institute. Brian Reid, chief economist at ICI, said asset gains could help cover some of the amounts retirees would have to withdraw.

Still, distributions are expected to grow exponentially over the next two decades because of a 1986 change to federal law designed to prevent the loss of tax revenue. Congress said savers who turn 70 ½ have to start taking withdrawals from tax-deferred savings plans or face a penalty. Specifically, retirees who turn 70 ½ have until April of the following calendar year to pull roughly 3.65% from their IRA and 401(k) funds, subject to slight differences in the way the funds are treated by the Internal Revenue Service. Then they must withdraw an increasing portion of their assets every year based on IRS formulas. The rules don’t apply to defined-benefit pensions, where retirees get automatic distributions.

The penalty for not taking distributions on time is a 50% tax bill on funds the retiree failed to withdraw.

The required distributions could come as a surprise to many boomers, said Alicia Munnell, director at Boston College’s Center for Retirement Research. “Individuals look at the pile of savings and think that’s their whole nest egg, not that they’ll have to pay some amount of that to the government,” she said. “It’s a very big deal when people realize they only have two-thirds or three-quarters of what they thought they had.”

Bronwyn Shone, a financial adviser in Pleasanton, Calif., said many of her clients aren’t aware of their legal obligation to take distributions. “I think some people thought they could let the money grow tax-deferred forever,” she said.

The outflows aren’t a surprise to most asset management firms, but they could force some dramatic changes. Firms will have to lower fees and offer more services to convince retirees to keep their savings at the firms, said Walt Bettinger, chief executive of brokerage firm Charles Schwab Corp. That would lower a firm’s profitability by raising costs per customer, he added.

Charles Schwab, which manages some $208 billion in 401(k) assets, typically has to move 10% of those funds around in any given year due to retirement, death or job changes. Mr. Bettinger expects that number to rise to 15% because of required withdrawals. “A 5 point increment of trillions in assets is a big number,” Mr. Bettinger said. “What’s happening is providers are having to be more aggressive to fill the gap.”

A Schwab spokesman said the company lowered fees on 401(k) plans about two years ago, by offering more low-cost options in exchange-traded or target-date funds. “We have been anticipating fee competition in 401(k)s for quite some time,” he said.