Borrowing for Retirement

As recent editions of our Weekly Top 10 suggest, there’s growing academic concern about the amounts of money consumers are borrowing.  Would any rational individual go out to encourage consumers to borrow even more?

Well, yes.  Ian Ayres (left) and Barry Nalebuff (Yale Law and Management, respectively) make just that argument in an essay, Mortgage Your Retirement, in this week’s Forbes magazine.  Ayres and Nalebuff suggest that consumers borrow money in their younger years to buy stocks on margin, thus greatly increasing the returns on their retirement portfolios.  The returns, they calculate, would on average double those obtained by the traditional strategy.

[Frank Snyder]