Is the War Over? The Market says so

This week, the S&P 500 rose above its February 27^th, 2026, level, the day before the Iranian war.  Apparently, the market has decided that the war is over or at least is anticipating that a deal will be reached shortly. Oil fell to about $85 per barrel, a drop of $12 per barrel over the week, but was still above its pre-war level of $66 per barrel.  Increasingly, the fog of war is lifting, and the market is focusing on economic growth. So far that is a good thing.

Obviously, the market could be wrong. As of this writing, negotiations are ongoing, but the market believes that the war risks to the global economy are diminishing. As we shift back to economic growth the data looks good. Here is a quick summary of some of the key economic data:

1)      Corporate profitability

As we have mentioned many times corporate profits drive the stock prices. While most S&P 500 companies have yet to report their first quarter earnings, of the 20 or so that have released earnings, most have exceeded forecasts. The big financial companies, including JP Morgan, Goldman Sachs, Citigroup, and Bank of America released earnings this week with overall positive results. The bottom line is that profits are growing and surprising to the upside. Moreover, analysts estimates for 2026 revenues and earnings continue to be optimistic, with analysts forecasting 7.6% to 8.5% growth in 2026.

2)      Employment

The US labor market is ok and just ok.  There has been a noticeable reduction in new jobs but also a noticeable reduction in new employees, reaching an equilibrium that is keeping unemployment rate low.  The reduction in new jobs is often attributed to the rise of AI, which may just be beginning. The reduction in new workers is often attributed to reduced immigration.  Companies that want to grow and expand will spend money on workers and capital. At present companies appear to prefer spending money on capital, chasing the potential AI productivity growth.

3)      GDP

First quarter GDP, per the Atlanta Fed’s GDP Now forecast, is expecting 1^st quarter GDP growth to be 1.3%.  While this is not stellar, it shows the resilience of the US economy in the face of the higher oil prices and lower consumer confidence that the war brought.  With the removal of these obstacles, most forecasts for GDP growth cluster between 2.2% and 2.5%, which is solid growth.

The overall message is that the US economy continues to show remarkable strength and resilience.  As the war recedes we welcome a refocus on the economy. Overall, we are cautiously optimistic that the remainder of the year will bring steady growth.

1. Cash Savings

Ok. I admit that cash savings do not qualify as ‘retirement accounts’, but saving money outside of and in addition to your 401k or IRA savings is a good way to build flexibility and freedom. You can simply add money to your bank account, or open a brokerage account. While these types of accounts do not enjoy the tax advantages of a 401k or IRA, they also do not have the restrictions and can be accessed at any time.

2.The Age 55 Rule

An often overlooked rule in the Tax Code is what we call the “Age 55 Rule”. This exception allows you to take money out of your 401k without penalty if you are 55 years old or older when you retire. The IRS rule is fairly straightforward, but here are a few important considerations. First, the exception applies only to 401k’s, not IRA’s, so you must take the distribution directly from your 401k before rolling it over to an IRA. Secondly, the rule requires you to be 55 years old or older in the year in which you retire. This means that you cannot retire at 54 and then begin taking distributions from your 401k at age 55. Finally, your company may put additional restrictions on distributions beyond the IRS rules. For example, many companies will now require employees to take a 100% distribution when distributing from a 401k, which means you only get one chance to use the Age 55 Rule. You can still roll over the majority of your 401k, taking a taxable distribution for only what you need, but these types of company restrictions can limit your ability to bridge multiple years using the Age 55 Rule.

3. The Substantially Equal Payment Plan

We have written in the past about the Substantially Equal Payment Plan or SEPP. Sometimes called a 72(t) for the Tax Code section that authorizes this exception, the SEPP provides for penalty-free pre 59.5 distributions from an IRA when equal annual payments are made for the longer of 5 years or until the age of 59.5. Essentially, the IRS is saying “you can access your retirement accounts without penalty, but only if you are really retiring.” Unlike the Age 55 exception, the SEPP exception is very complex, and the penalties for error are significant, so I highly recommend you get help from a professional advisor before starting a SEPP. Nonetheless, they can be an effective tool to bridge a retiree to age 59.5

4. Executive Compensation

In addition to more common 401k or IRA savings accounts, some executives are also eligible to participate in deferred compensation plans or stock option plans that can provide income before age 59.5. For example, a 457 plan is a type of deferred compensation plan that, while designed for retirement, can be accessed without penalty before age 59.5. Similarly, stock option plans often require retirees to sell vested options upon retirement. While these plans are both taxable, they do not have the 10% penalty for distribution before age 59.5 like many other retirement vehicles. Not everyone has these types of plans, and there are several different types of plans. If you are not sure if you are eligible, and what type of plan is available, ask your human resources department.

5. Putting it all together

Once you have researched all the options, you can use each of these exceptions to prepare a pre-59.5 that will provide the income you need for retirement. Often, the best plan does not use just one exception but uses several at the right time to achieve the best income and tax result. It is hard to retire in your 50’s, but mostly because it requires significant savings to provide income for the rest of your life. The tax rules surrounding age 59.5 should not prevent you from retiring when you want. Admittedly, the rules can be complex, but most retirees can retire in their 50’s without incurring the 10% penalty. Most importantly, with the right planning, you can achieve the goal of retiring early.

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