For a subset of young workers, the name of the game is to squirrel away enough savings and investments so retirement can come early, substituting strategic personal finance for a lifetime of labor. (FIRE!)
It turns out that the post-pandemic boom and explosion of stock prices has already gifted many older Americans with a version of that lifestyle, according to Bank of America — and it’s affecting the economy.
Labor force participation — which measures the share of people employed or seeking work among the total population — never recovered after the shock of the pandemic.
According to BofA’s economics team, led by Aditya Bhave, the biggest driver behind the decline in overall labor force participation has been workers over age 55 leaving the workforce.
“This debunks a popular bearish narrative on the labor market: ‘the u-rate would have been higher if participation hadn’t fallen,'” Bhave wrote.
Read more: When should you claim Social Security? Here’s how the math compares.
There’s a clear reason why that cohort has been able to do this while younger workers facing layoffs have had to apply to other companies, switch careers, or go independent: the stock market’s incredible gains.
When you’ve been laid off at a certain age, glancing at your decades-old stock portfolio can make the choice of what to do next clearer — if you’ve been participating in the stock market.
“We think the surge in equity wealth has likely made it easier for many workers to retire,” Bhave wrote. The benchmark S&P 500 has risen more than 30% over the past two years.
An earlier Bank of America analysis found a modest negative relationship between equity gains and older workers’ participation. There’s a post-COVID, stock-fueled generational retirement party going on. Or as the analysis put it, “Who needs income if you have wealth?”
It’s not all wine tours and golfing trips for our elders, though.
While older households are flexing enormous spending power, claiming three-quarters of total US net worth, that wealth isn’t distributed evenly, according to a report by the Bank of America Institute, published on Wednesday. Around 14% of people on Social Security rely on it for more than 90% of their income.
So, not all older households are sitting around and sipping from booming retirement accounts.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.
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