As market volatility persists and the Federal Reserve signals interest rate cuts down the line sometime in 2024, a wave of early retirements is underway. The number of people opting to retire early has jumped 80% over the last six months to 2.7 million, according to a model developed by an economist at the Federal Reserve Bank of St. Louis.
Yahoo Finance’s Rachelle Akuffo and Akiko Fujita break down the details, providing insights into how markets have affected retirement funds.
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Editor’s note: This article was written by Angel Smith
Video Transcript
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RACHELLE AKUFFO: The US is seeing about 2.7 million more retirees than anticipated. That’s according to Axios and a model designed by an economist at the Saint Louis Fed. Now, to give you some context, that’s 80% higher than the 1.5 million retirees six months ago and a new post-pandemic high. Economists are pointing to market performance and expectations for a rate cut as the reason for older generations exiting the labor force and taking those retirement gains with them.
I thought it was interesting that in the article from Axios, they talked about data from Fidelity showing the number of retirement millionaires, those who became millionaires based on their 401(K)s jumped 25% so far this year because of this rally. And I mean, retiring in a bull year certainly a good time to do it, but interesting that it’s this many because of the rally because of how much some of these 401(K)s have ballooned.
– Yeah. Not a bad way to go out, right. When you think about exiting the labor market because it was just a few years ago, we were talking about those workers who were on track for retirement potentially having to extend or delay retirement because of what they were seeing in their retirement accounts. If you think about where the S&P 500 was last year up, more than 20%.
The other thing that this data coming down or this model coming down from the Saint Louis Fed also points out is housing prices. They remain pretty elevated. So, if you are of a retirement generation or retirement age, I should say that’s another reason to feel comfortable.
The other thing, though, something that we’ve been talking about, Rachelle, which is companies increasingly sort of pointing to the end or at least the phasing out of remote work. And that if you have to go back into the office and you’re close to retirement age, maybe you don’t want to make the commute. I mean a lot– it’s hard to pinpoint this on just one factor, but that is certainly a big bump when you think about where it was in previous years.
RACHELLE AKUFFO: It’s true. And you think of all the people who potentially now leaving the labor force when you already have a tight labor market. Be interesting to see how that dynamic plays out longer term.