Stock Surge Sparks Retirement Wave! BofA: 'Wealth Effect' Lets Older Workers Retire with Confidence

Bank of America Securities' latest report indicates that a large number of older workers in the U.S. are retiring, possibly due to the wealth effect from stock market gains.

The labor participation rate for workers aged 55 and above has not fully recovered since the pandemic. In February 2020, just before the pandemic was officially declared, the labor participation rate for this age group was 40.3%, but it has since fallen to 36.9% as of July 2026.

Aditya Bhave, an economist at Bank of America Securities, notes, "We believe this is related to the more than 35% rise in the S&P 500 index over the past two years." This surge may make it easier for those considering retirement to decide to leave the workforce.

Bhave adds, "There has always been a puzzle in labor market data. If you look at the U.S. economy, most indicators have recovered very well since the pandemic, and at a pace much faster than we originally expected. One of the lagging indicators is the labor participation rate of older workers. And over the past few months, this indicator has further declined."

However, Bhave also cautions that you cannot attribute the exit of older workers from the workforce entirely to the stock market rise.

"I don't think there is any single factor that can fully explain this phenomenon. But considering the performance of the stock market over the past few years and the cumulative gains since 2020—the S&P 500 index has now more than doubled—this increase in wealth is very likely to give some people more incentive to retire, as they will think, 'Okay, I don't need to work anymore.'"

Bhave adds, "This gives people a considerable degree of confidence in retirement. Even those with relatively low risk tolerance have a considerable buffer."

What if the stock market reverses? How will their wealth fare?

On this, Bhave says, "In this case, I believe they have enough of a buffer, so they may think: the stock market may reverse, but as long as it's not a catastrophic crash, considering the wealth that has already been accumulated, I can still retire with confidence."

Financial advisors serving clients nearing retirement are not surprised by this analysis. Cary Carbonaro, author of 'Women and Wealth' and a certified financial planner, notes that the wealth effect is indeed real.

She says, "We've experienced double-digit stock market gains in 2023, 2024, and 2025, and 2026 is also expected to continue this performance. The retirement wave is happening due to these gains, giving my clients more choices than they've ever had before."

Tyson Sprick, a financial planner in Overland Park, Kansas, has similar observations. "The numbers on the screen have never been this beautiful, and some clients have gained confidence and finally decided to retire."

However, he also notes that clients will ask, "How long can this situation last?" and "If the stock market crashes, will I be okay?"

"So, we take all these factors into account and use forward-looking financial planning assumptions based on current market levels. While we can't predict the future, we haven't ignored this fact: this strong performance can't last forever."

Even those not yet ready to retire are benefiting from this market boom. According to another Bank of America data, the average 401(k) account balance in the second quarter of 2026 reached $124,250, up 15% from a year ago. The data shows that about two-thirds of employees believe that their current retirement savings progress is sufficient to allow them to retire at their ideal retirement age and in the lifestyle they desire, an increase of 6 percentage points from last year.