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Strong stock gains have lifted retirement account balances, giving some workers more room to consider leaving their jobs early. Fidelity reported that average 401(k), 403(b), and IRA balances reached record highs in the second quarter of 2026, due in part to the stock market.

A larger balance, however, does not guarantee that it will support decades of retirement spending. The danger is greatest for someone whose plan depends on stocks holding their current value — or continuing to rise.

Consider a retiree with a $1 million portfolio who plans to withdraw $40,000 a year. That first withdrawal represents 4% of the starting balance. If the portfolio falls 25% before the withdrawal, the same $40,000 represents more than 5% of what remains. The retiree must sell more shares to raise the cash, leaving fewer shares to participate in a recovery.

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Early losses mean trouble

Financial planners call this sequence-of-returns risk. Fidelity explains that losses early in retirement can do lasting damage when they coincide with withdrawals, even if markets later recover. A downturn late in retirement can have a different effect because the investor may already have funded many years of expenses.

Early retirement adds another challenge: The money must last longer. Leaving work at 60 instead of 65 means five fewer years of paychecks, and potentially, five additional years of withdrawals. 

A person retiring before 65 generally must also arrange health coverage until Medicare begins. Medicare says people receiving Social Security retirement benefits before 65 ordinarily get Medicare when they turn 65, rather than when they first retire.

Social Security presents a separate decision. Benefits can begin at 62, but claiming them permanently reduces the monthly amount compared with claiming at full retirement age. For people born in 1960 or later, the Social Security Administration’s table shows a 30% reduction at 62. Waiting may produce a larger monthly benefit, but requires another source of income in the meantime.

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What to do

Before setting a retirement date, prospective retirees can estimate essential spending, health insurance costs, and the amount they would need to withdraw if stocks fell sharply. 

A mix of cash, bonds, and stocks may give them more flexibility over which assets to use during a downturn. Diversification can reduce exposure to a single investment, although it cannot prevent losses across a portfolio, according to the Securities and Exchange Commission.

There is limited evidence that recent market gains alone are causing a broad wave of early retirements. In a 2026 Allianz Life survey, 42% of retirees said they had retired earlier than expected. Among those who did, 21% cited being financially ready sooner than expected; health problems and job loss were more common reasons. The findings underscore why a retirement plan needs to work through a bad market as well as a good one.