Some workers are retiring early as rising stocks boost their 401(k) balances, but a downturn could erode savings and lead some to return to work. Separately, an AARP survey found 6% of retirees had “unretired” in the first half of 2026, largely because they needed money.
The S&P 500 gained 24% in 2023, 23% in 2024 and 16% in 2025. Bank of America economists said strong equity markets were partly behind falling labor-force participation among older workers. Capital Economics estimated that an AI bubble would burst in 2027, with stocks falling at least 20% from the S&P 500’s most recent high; this is a forecast, not a confirmed event.
Sequence-of-returns risk arises when retirees sell assets after a market drop to cover expenses, shrinking savings before a recovery. A bucket strategy can keep one to three years of expenses in accessible cash, funds for years three to 10 in moderate-growth and income investments, and money needed 10 or more years out in assets that can take more risk. Advisors generally recommend shifting to a more conservative portfolio over time.
