Want to Retire Early? Watch These Financial Risks.
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Here's your Money Briefing for Thursday, February 24th. I'm J.R. Whelan for The Wall Street Journal. During the pandemic, millions of American workers who were closing in on retirement age decided it was a good time to get a head start on leaving the workforce. But financial planners say retiring early comes with pitfalls.
You're particularly vulnerable at that point because, you know, when you first retire, you're looking at, you know, as many as three decades of retirement stretching out in front of you. And if your portfolio hits losses at the outset, it can make it especially difficult to recover.
So how can you avoid financial risks and ensure your retirement nest egg will be there for you as you live out your golden years? Our retirement reporter, Ann Turgason, has been talking to financial planners and people who retired early during the pandemic. She joins us after the break.
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Why did millions of Americans choose early retirement during the pandemic?
Many Americans who saw their investment portfolios rise substantially during the economic recovery felt it created an opportunity to retire early. And while getting a head start on enjoying your wealth in retirement might seem attractive, financial advisors warn it can also be risky. Here to talk about it is WSJ retirement reporter Anne Tergesen. Anne, it's great having you with us.
Oh, thanks for having me.
So, Anne, 4.2 million people left the workforce while the pandemic spread, and many of them were early retirees. And you spoke with several people who did retire early. What did they tell you about that decision-making process?
The people I spoke to represent a subset of the people who left the workforce. Economists I spoke to estimated that over one-third of people who left the workforce have done so partially because of rising asset prices. So we've seen, you know, significant appreciation in both home prices and stock prices since the pandemic began. And I spoke to a number of people who were motivated in part to retire because of what they saw their investment portfolios and their home prices do. It just made them feel more economically secure.
Yeah, it seems like the economic recovery has given people confidence that their portfolio is in a place where it would be okay to retire. But did it take people by surprise that their portfolio ran up so quickly and opening up the possibility of early retirement?
You know, I think people were surprised. I think that, you know, I spoke to a guy who who lost his job right before the pandemic hit. And I think, you know, he aspired to early retirement. And, you know, that that's sort of the goal, been a goal of his given that, you know, he really struggled. In his case, he loves hiking and he wanted to live a different kind of lifestyle. But I think the fact that the market so quickly appreciated to the point where it kind of hit the number that he had in mind as what he needed in order to retire, I think that surprised him.
You know, a lot of people say they'd love to retire at an early age, but to be sure, not everybody is able to do that, right?
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