You got even richer during the pandemic. Early retirement is still risky.

Many are already taking the plunge. Roughly 4.2 million people left the workforce as the pandemic spread across the country, according to Miguel Faria-e-Castro, senior economist at the Federal Reserve Bank of St. Louis, and more than one in three because of rising portfolios and home values. partially did so. This helped raise the percentage of retirees in the US population to 19.4% by October 2021, from 18.3% in early 2020.

Greg Gressel decided to retire in 2020 after being fired from his job at Hershey Company. The 56-year-old, who now lives in Durango, Colo., said he feels comfortable doing so because of a bull market and a rise in his home. The value pushed his net worth above his retirement savings goals.

“I feel guilty saying this, but financially, Covid is the best thing that has happened to me,” Mr Gressel said.

Moving the retirement date can be a gamble. Those who quit early, miss the chance to save extra money and must retain their holdings for a longer period of time. Fewer expenses, including health insurance, than before Medicare began at 65. If recovery occurs early in retirement, the loss can be amplified and it may be harder to recover.

Yet there are good reasons for workers to feel more confident about the power of their nest eggs. One is the performance of the stock market during the pandemic; Since March 31, 2020, the S&P 500 has risen 79.4%, including dividends. The second is the housing market, which exploded with demand as the pandemic triggered a scramble for more living space. According to the National Association of Realtors, the current current home price rose 17% to a record $346,900 in 2021.

American families are richer now—at least on paper. Families led by someone aged 55 to 64 increased by $180,095 between January 1, 2020 and September 30, 2021, according to Dr. Faria-e-Castro’s analysis of Federal Reserve data Hui. That is, an increase of 15.3%. For those 65 to 74, the average increase was $194,127, or 16%.

The start of 2022 was a reminder of how quickly some of those numbers could change. The S&P 500 fell 5.3% in January, and the technology-heavy Nasdaq retreated further. Many market forecasters are predicting diminishing returns ahead.

“People forget that markets go down,” said Sharon Oberlander, a consultant at Merrill Lynch Wealth Management in Chicago. Given the strong performance of stocks since the pandemic hit, some early retirees may have an “exaggerated sense of optimism about future returns.”

The key to any early retirement decision, according to financial advisors, is careful planning. Some advisors suggest lowering spending targets to dial back on riskier investments or to increase the odds of making the money last. Research firm Morningstar Inc. recently recommended that retirees who want stable inflation-adjusted income over three decades spend no more than 3.3% of their savings at the start of their golden years, upping that guideline to 4%. modify from. This was done because diminishing returns were expected in the coming years.

In Oak Park, Calif., Doug Wilson retired in October from a sales job at Johnson Controls International plc. The 64-year-old said he feels comfortable doing so because a bull market and a recent 30% increase in local real estate values ​​pushed his net worth above his retirement savings target.

The plan he and his mentor, Danny Michaels designed to account for mortgages, four years of college tuition for their youngest daughter, and health insurance through COBRA, a federal law that allows former employees to temporarily release their coverage. allows to keep. Mr. Michael recently reduced the percentage of Mr. Wilson’s portfolio to equities from 70% to 60%. In the event of a bear market, Mr. Wilson could support his family for about eight years by liquidating his bondholdings without selling any stock, Mr. Michaels said.

“I have no interest in working for Corporate America again,” Mr. Wilson said.

One worker who worried about retiring early was former United Airlines pilot Mark Embry, 59, who planned to quit between the ages of 62 and 65. Mr Embry said he began to feel comfortable about the idea of ​​retiring early when his 401(k) account had grown to $1.8 million about six months ago. “My goal was to have $2 million in the bank.”

The final push, he said, came when his employer, United Airlines Holdings Inc., began requiring employees to receive the Covid-19 vaccination. “I think it should be an option, not a mandate,” the Marathon, Fla., resident said of the vaccine.

His decision meant he forfeited his $250,000 annual paycheck, as well as the opportunity to put the $60,000 per year into his 401(k) that he and United were contributing. Meanwhile, health insurance premiums for Mr Embry and his wife have doubled to $1,000 a month.

To make early retirement work, Mr. Embry and his wife recently sold their 2,600-square-foot home in Houston for about $300,000 and moved into the one-bedroom home they had bought years earlier at Marathon. The couple plans to spend anywhere from $10,000 to a few thousand dollars a month while working.

Mr Embry, who holds more than 70% of his portfolio in stocks, also has a plan in case the market goes down. His financial advisor Ben Lies said he can claim Social Security benefits early with the plan to help protect his nest egg. Mr Embry said he is also retaining his pilot’s license, even though he “never envisions working for a paycheck again.”

Another airline employee who cut short her career was Elizabeth Ellis Gonzalez, 62, who retired on December 1 after nearly 41 years at Southwest Airlines Company, where she took passengers for flights at El Paso International Airport in Texas. examined.

Ms. Gonzalez, who is single, had planned to retire at age 65. But over the past decade, she pursued a second career as an actress in the independent film industry in El Paso and New Mexico.

After long days of filming, he found it grueling to work the South-West shift at 3 a.m. “I didn’t want the work to get in the way of what I really wanted to do,” she said.

Ms. Gonzalez’s financial advisor, Miguel Gómez, assures her that even though her acting roles are unpaid, she’ll still be able to make money, given her $950,000 401(k) balance, modest expenses, debt-free balance sheet, home equity, and freebies. Can afford to retire. Retired health insurance from Southwest.

Ms. Gonzalez plans to spend about $42,000 a year pre-tax from her portfolio until she claims Social Security in a few years. Mr Gomez said his portfolio is now half in stocks and half in bonds, to help protect against the risk of a stock market downturn.

Some people who decided to retire early did so after losing their jobs. Mr Gressel found himself in that position after Hershey’s removal as director of disruptive supply chain in January 2020.

That spring, he invested some of his severance in beaten-down technology stocks. Over the summer, while hiking the Continental Divide Trail, he checked the value of his portfolio while replenishing his supplies in Lincoln, Mont. The balance was just shy of the $2 million he and his wife, Beth Ann Newman, would need to retire.

“I had a big smile on my face,” he said.

Ms. Newman, 54, quit her job as an administrative assistant at a medical center, and the couple sold their home in Hershey, Pa., for $474,000—or 40% more than they paid for it in 2012. He bought a house for $515,000. With a mortgage of less than 3% in Durango. “We were not only beneficiaries of the stock market, we were also beneficiaries of a housing bubble,” Gressel said.

In November, he sold his tech shares for a huge profit. Currently, Gressels holds 10% of its portfolio in stocks, 15% in commodities, 30% in bitcoin and the rest in cash.

“I’m not into bitcoin next year. I’m in it for 10 years. I believe in the long-term thesis,” Mr. Gressel said.

He and his wife, parents of five grown children, “live very frugal lives. I like to hike. My wife loves to run.” Mr Gressel believes he could get a consulting job, but “she’s not even on my radar anymore.”

“Maybe I’m not as concerned about the long run as I should be,” said Mr Gressel. He said he’d seen people die soon after retiring, which “really influenced my view of how much is enough. Finding freedom to do things I wouldn’t be able to do 20 years from now—how much is it worth? ?”

improvement and amplification

Since March 31, 2020, the S&P 500 has risen 79.4%, including dividends. An earlier version of this article incorrectly stated that it had increased by 90.7% during this period. (corrected on February 11)