Something is shifting in the American workforce. Millions of workers in their late 50s and early 60s are walking away from their jobs at a pace that goes beyond normal demographic change. Economists think they know a large part of the reason.
The stock market’s AI-driven rally is helping older workers retire earlier than they planned, CNBC reported.
Bank of America economists Stephen Juneau and Aditya Bhave called the trend a “stock-fueled retirement party” in a recent research note, arguing that soaring equity markets are accelerating the exit of older workers from the labor force.
What the data shows about older workers leaving workforce
“Labor force participation is collapsing among older workers. We think the strength of the equity market is partly to blame,” Juneau and Bhave wrote in a research note, according to CNBC.
The numbers back them up. The labor force participation rate for workers aged 55 and older fell from 38.6% in August 2024 to 37.2%, according to Bureau of Labor Statistics data cited by CNBC. That is a meaningful decline in just over a year.
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The drop is not entirely a new story. Older workers’ participation collapsed during the Covid pandemic and never fully recovered. It held relatively steady until the summer of 2024, then took another sharp leg down. The stock market’s gains since then line up with that second decline.
Demographics are also pushing the numbers. More than 4 million baby boomers are expected to reach age 65 each year from 2024 through 2027.
Some of those workers were going to retire regardless. But economists say the market is making it happen faster and earlier than it otherwise would.
How stock gains are making early retirement possible
The S&P 500 returned 26% in 2023, 25% in 2024, and 18% in 2025, including reinvested dividends, according to data compiled by Aswath Damodaran, a finance professor at New York University, CNBC noted. The index was up about 16% in 2026 as of Sept. 21.
Those gains have lifted retirement account balances across the country. The average 401(k) balance rose to $155,800 in the second quarter of 2026, up 13% from a year earlier, Fidelity confirmed.
For workers who were close to their savings target, those extra gains moved the finish line closer.
The broader wealth effect was even larger. Household and nonprofit net worth rose by $12.8 trillion to $195.9 trillion in the second quarter of 2026, driven primarily by stock market gains, according to Federal Reserve data.
CNBC reported that this was the largest quarterly wealth increase since the Fed began tracking the figure in 2000. “It puts people in a position where they can retire early, because they’re in a favorable financial position,” said Thomas Ryan, a North America economist at Capital Economics.
Early retirement programs added to the trend.
Microsoft offered voluntary retirement packages to some U.S. employees. Federal workers were offered separation incentives connected to the Department of Government Efficiency. Those programs accelerated departures in sectors that might otherwise have held workers longer.
What happens to retirement plans if stocks fall?
The retirement wave runs on stock prices. If markets drop sharply, the economics reverse.
Ryan said some workers could “unretire” and return to the workforce if an AI-related market drawdown damages their financial position. Workers who retired in their mid-50s or early 60s may reconsider if their 401(k) balances fall significantly.
The risk is particularly acute for retirees who must sell investments to cover living expenses. Selling during a downturn creates sequence-of-returns risk. A retiree who withdraws money early in a market decline has fewer assets left to recover when markets eventually rebound. The withdrawals lock in losses and reduce the portfolio’s ability to grow back.
Financial advisors generally recommend that a typical 65-year-old still hold around half a portfolio in stocks for long-term growth, with bonds and cash covering near-term spending needs. That cushion reduces the pressure to sell equities during a sell-off.
If you are nearing retirement, keeping two to three years of planned withdrawals in cash or short-term bonds means you can avoid selling stocks at the worst time.
The goal is not to get out of the market. It is to make sure a bad year does not force your hand.
What the exodus of older workers means for the broader job market
Older workers leaving their jobs has created openings. New entrants and unemployed workers have had more opportunities as a result, and economists say this has helped keep the unemployment rate relatively low.
It stood at 4.1% when CNBC reported, a historically low level.
If the stock market turns and older workers delay retirement or return to work, that dynamic shifts. More workers competing for the same openings could push the unemployment rate higher. The same wealth effect that is currently supporting retirements could work in reverse.
The labor market’s current calm is partly built on stock prices staying where they are. That is worth keeping in mind as AI valuations remain stretched and economists debate whether the rally can hold.
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