You've saved diligently for decades. You have a number in mind. You think you're ready. But here's the question most people never ask: What happens to your retirement plan when things don't go as expected?
Markets crash. Inflation spikes. Healthcare costs skyrocket. A spouse passes early. These aren't scare tactics — they're real scenarios that derail even the most carefully built retirement plans. The good news? You can prepare for them. It's called stress-testing, and it's one of the most valuable exercises we do with clients at Lock Wealth Management.
Curious how your plan holds up under pressure? Schedule a complimentary consultation with Ben Loughery today.
What Does It Mean to Stress-Test a Retirement Plan?
Stress-testing simply means running your retirement plan through a series of "what if" scenarios to see where it holds strong — and where it might crack.
Think of it like a financial fire drill. You're not expecting the house to burn down, but you want to know everyone knows where the exits are.
At its core, stress-testing answers one critical question: Does my plan still work when the world doesn't cooperate?
The 5 Most Important Stress Tests for Retirees
1. The Market Crash Test
What if the market drops 30–40% in the first two years of your retirement?
This is called sequence of returns risk, and it's one of the most dangerous threats to a retirement portfolio. A market crash early in retirement — before your portfolio has had time to recover — can permanently reduce how long your money lasts, even if the market eventually bounces back.
How to stress-test it: Run your plan assuming a significant market downturn in years one through three. Does your withdrawal strategy survive? Do you need to reduce spending temporarily? A good retirement plan should have guardrails for exactly this situation.
2. The Longevity Test
What if you live to 95 — or beyond?
Most people underestimate how long they'll live. According to actuarial data, a healthy 65-year-old couple has a 50% chance that at least one spouse will live past 90. That means your retirement could last 30 years or more.
How to stress-test it: Plan to age 95 as a baseline — not 80 or 85. If your plan runs out of money at 88, that's a problem worth solving today, not in 20 years.
3. The Inflation Test
What if inflation averages 4% instead of 2% for the next decade?
We got a painful reminder in 2022 that inflation is real and can erode purchasing power fast. For retirees living on a fixed income, prolonged inflation is especially damaging.
How to stress-test it: Model your plan with a higher inflation assumption — 3.5% to 4% — and see how it affects your purchasing power over time. Pay special attention to healthcare costs, which historically inflate faster than general consumer prices.
4. The Healthcare Shock Test
What if you or your spouse face a major health event — a long-term care need, a serious illness, or years of in-home assistance?
The average cost of a private room in a nursing home is now over $100,000 per year. A multi-year long-term care event can devastate even a well-funded retirement portfolio.
How to stress-test it: Estimate the cost of 2–5 years of long-term care in your area and model how it impacts your plan. This is also a good time to evaluate whether long-term care insurance, hybrid life/LTC policies, or self-insuring makes the most sense for your situation.
5. The One-Income Test
What if one spouse passes away earlier than expected?
This is the test most couples avoid — but it's critically important. When a spouse dies, Social Security income often drops (you keep only the larger of the two benefits). Pension income may be reduced or eliminated. But expenses don't drop proportionally.
How to stress-test it: Model your plan with only one income stream. Can the surviving spouse maintain their lifestyle? Is there life insurance in place to bridge the gap? Does the estate plan ensure a smooth transfer of assets?
What to Do When Your Plan Fails a Stress Test
Don't panic — that's exactly the point of stress-testing. Finding a vulnerability now means you have time to fix it.
Common solutions include:
- Adjusting your withdrawal rate — spending slightly less in down years and more in up years (dynamic withdrawal strategies)
- Building a cash reserve — keeping 1–2 years of expenses in cash so you're never forced to sell investments at a loss
- Diversifying income sources — combining Social Security, portfolio withdrawals, annuity income, or rental income to reduce reliance on any single source
- Delaying Social Security — every year you wait past 62 (up to age 70) increases your benefit by 6–8%
- Right-sizing your spending plan — identifying which expenses are fixed needs vs. flexible wants, so you know exactly where you can pull back if needed
Stress-Testing Is Not a One-Time Exercise
Your life changes. Markets change. Tax laws change. A retirement plan that passed every stress test at 60 may have new vulnerabilities at 67. That's why ongoing planning — not just a one-time retirement calculation — is so important.
At Lock Wealth Management, we revisit our clients' plans regularly, running updated stress tests as their lives evolve. It's not about living in fear of what could go wrong. It's about having the confidence to enjoy retirement fully, knowing your plan is built to handle whatever comes.
Is Your Retirement Plan Built to Last?
If you've never run your plan through these scenarios — or if it's been a few years since you have — now is a great time to take a closer look.
Schedule a complimentary consultation with Ben Loughery at Lock Wealth Management and let's stress-test your retirement plan together. Because a plan that only works in perfect conditions isn't really a plan — it's a wish.
Ben Loughery is a CERTIFIED FINANCIAL PLANNER™ and founder of Lock Wealth Management, based in Atlanta, GA. He specializes in retirement income planning, tax optimization, and helping clients build financial confidence at every stage of life.
