Droves of older workers are stepping out of the workforce, and a new Bank of America Securities report says wealth generated from a surging stock market could be an underlying factor.
The labor force participation rate among workers 55 and older, which never recovered after the pandemic shock, has dropped further since then. In February 2020, right before the pandemic was officially declared, the US labor force participation rate for workers ages 55 and older was 40.3%. In July 2026, it had dropped to 36.9%.
“We think this is related to the more than 35% increase in the S&P 500 over the last two years,” Aditya Bhave, a US economist at Bank of America Securities, told Yahoo Finance.
That surge has likely made retirement an easier choice for many folks debating when to hit the exit ramp.
“There’s been this puzzle in the labor data,” Bhave said. “If you look broadly across the US economy, most indicators recovered really nicely after the pandemic — a lot faster than what we were expecting. One of the laggards was labor force participation amongst older workers. Over the last several months, it’s taken another leg down.”
Bhave was careful not to pin it all on the market.
“I don’t think any one causal factor can fully explain it,” he said. “But it’s quite likely that given what equities have done obviously over the last couple years, but also cumulatively since 2020 — when the S&P 500 has more than doubled — that kind of increase in wealth is going to incentivize some people to retire because they’ll feel like, ‘Okay, I don’t have to work.'”
“It gives people a good amount of confidence that they can retire,” Bhave added. “There’s a lot of cushion, even for folks that are somewhat risk-averse.”
What happens to their fortunes if markets turn?
“In this instance, there’s enough of a cushion, at least in my view, that folks can say, ‘There could be a drawdown in equities, but as long as it’s not completely disastrous, I’ve seen huge accumulation in my wealth, and I’m still going to feel very comfortable retiring even if there is a drawdown,'” Bhave said.
Read more: How much can you contribute to your 401(k) in 2026?
Financial advisers who work with clients nearing retirement weren’t surprised by this analysis.
“The wealth effect is real,” said Cary Carbonaro, a certified financial planner and author of “Women and Wealth.” “We are coming off double-digit market gains from 2023, ’24, and ’25 and on pace for 2026. Retirement is happening because of these gains. It is giving my clients more options than they had before.”
