By Randall Vermillion @

Despite all the money you may have made in the stock market lately, it’s probably still to risky to retire early. During an elevated market, it may seem like a great choice to retire. But what if the market dips over 30%, or 40%, or even 50%? The threat mega bear markets of this century saw dips just like those. If another one happens, will your portfolio hold up? Anne Tergesen writes in The Wall Street Journal:

If you own stocks or real estate, you’re probably richer than you were when the pandemic began. That could put early retirement within reach. Taking such a step is still risky.

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

Greg Gressel decided to retire after being laid off from his job at Hershey Co. HSY -1.49% in 2020. The 56-year-old, who now lives in Durango, Colo., said he felt comfortable doing so because a bull market and rise in his home’s value pushed his net worth above his retirement savings goals.

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

Moving up a retirement date can be a gamble. People who leave jobs early forfeit the chance to save additional sums and must make their holdings last longer. Some underestimate expenses, including for health insurance before Medicare begins at 65. If a correction occurs early in retirement, losses can be magnified and it can be harder to recover.

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

U.S. families are now much richer—at least on paper. The average net worth of households headed by someone aged 55 to 64 rose by $180,095 between Jan. 1, 2020 and Sept. 30, 2021, according to Dr. Faria-e-Castro’s analysis of data from the Federal Reserve. That was an increase of 15.3%. For those 65 to 74, the average boost was $194,127, or 16%.

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

“People forget that markets go down,“ said Sharon Oberlander, an adviser 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.”

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