We talk with hundreds of individuals and families every year, and many of the questions they ask come back to one core concern: Can my retirement plan really survive the messy, unpredictable situations that happen in real life? Instead of only looking at straight line projections or average returns, we’re walking through how to “stress test” your retirement plan with real-world what-if scenarios so you can build confidence before a crisis hits.
In this episode, you will hear three of the biggest what-if questions clients have been asking over the past year.
- What happens if there is a major market crash right as you retire?
- What if you retire earlier than expected, either by choice or by force?
- What if there is a major health shock for you or your spouse?
Rather than focusing on doom and gloom, the goal is to rehearse these situations on paper so that when life happens, you already have a plan for how to respond.
We also share a simple three-step framework you can use to run your own retirement stress test at home. You will learn how to identify the what-ifs that matter most to you, estimate their impact on your spending and timeline, and choose proactive moves that make your plan more resilient. Along the way, they discuss sequence-of-returns risk, health insurance bridges before Medicare, using taxable brokerage accounts strategically, and how to think about funding future healthcare needs without overpaying for insurance you may not need.
How Your Retirement Plan Holds up in a Major Market Crash
Market declines are not rare events. On average, there is a roughly 10 percent correction every year, and more severe 20 to 50 percent drops show up several times over an investing lifetime. The first stress test question is simple. What if your portfolio fell 25 to 50 percent in the first year of retirement? How would that change your withdrawal plan, your retirement age, or your confidence about the long runway in front of you?
In the episode, we explain why it is so important to model this scenario before you pull the retirement ripcord. That includes asking whether you could reduce spending by 10 to 20 percent for a few years, and whether you have enough in your “safety bucket” of cash and bonds to ride out a multi-year downturn without selling stocks at the worst possible time.
We get a chance to practice this every year. If you cannot sit through an average 15 percent intra-year decline without panicking and changing your allocation, that is a warning sign that your portfolio might be too aggressive for you. Listen in as we talk through recent real-world examples, from the Covid crash to the 2022 inflation-driven decline and the sharp pullback in 2025, to show how clients who stayed invested and kept following their plan came out ahead over time. Remember, market crashes are temporary. The damage usually comes from our response, not the decline itself.
Planning for Early Retirement, Whether Chosen or Forced
The second scenario is early retirement, which for most people means any age before 65, when Medicare begins. Retiring early can be a dream outcome, but it can also be forced by layoffs, burnout, caregiving responsibilities, or health issues. We break this into three versions. The planned early retiree who intentionally saves to stop working sooner, the forced retiree who loses a job earlier than expected, and the person who gets an unexpected severance or buyout that makes retirement suddenly possible.
The big wild card here is health insurance. If you stop working before 65, you may be looking at several years of ACA marketplace coverage, private insurance, or COBRA, which can easily cost tens of thousands per year for a couple. That is a line item that can surprise people who have only run rough retirement numbers based on their savings and Social Security.
In the episode, we explain why building up a healthy taxable brokerage account can be a powerful tool for early retirees. Drawing from that bucket can give you more control over your taxable income, help you manage ACA subsidies, and allow you to delay tapping retirement accounts or Social Security when it makes sense.
We also talk about the emotional side of early retirement. Some people are financially ready but hesitate because of fears about health costs or leaving work. Others retire and then feel bored or disconnected a few months in. For those in strong shape, a sabbatical, leave of absence, or part-time work can be a good way to “practice retirement” and test what you want life after full-time work to look like.
Healthcare Shocks, Long-Term Care, and Protecting Your Plan
The third stress test is the one many people worry about most. A major healthcare shock for you or your spouse. That could be an unexpected hospital stay, a serious diagnosis, or a need for long-term care for one or both spouses later in life. These events are hard to predict and impossible to control, but that does not mean you have to be financially unprepared.
In these scenarios, there are important questions to ask. What if you had a sudden $50,000 to $100,000 medical bill? How would that be covered? What if one of you needed several years of higher care costs? Do you have a way to self-insure from your portfolio, are you relying on long-term care insurance, or some mix of both? He reminds listeners that your “emergency fund” for health shocks does not have to be all in cash. It can include safer assets that are easy to tap when needed.
Listen in as we share client examples where one spouse becomes very ill while the other is still working, or where couples choose to move into a continuing care retirement community so that care is available in the same place if health declines. She encourages people to have conversations with spouses and adult children about preferences long before they are in crisis. We also highlight tools like HSAs, disability insurance during working years, and understanding your plan’s deductible and out-of-pocket maximum so that you know what a worst-case year might look like.
Practicing Your Own Retirement Stress Test
You cannot control the future, but you can rehearse it. That’s why we provide a simple three-step framework you can use at home to run your own retirement stress test. Start by listing three to five what-if questions that keep you up at night. Then estimate the impact of each. Would it change your retirement date, your annual spending, or your need to go back to work? Finally, choose one or two proactive moves for each scenario, such as increasing your safety bucket, adjusting your allocation, building up a brokerage account, or putting better insurance coverage in place.
The point is not to imagine every possible negative event. It is to have enough of a plan for the big stress points that you feel more freedom to enjoy the retirement you have worked so hard for. If your plan can survive the hard conversations, it is much easier to relax and spend time doing what matters most to you.
Outline of This Episode
- [00:00] Retirement stress testing.
- [04:50] Key questions to ask about a 25 to 50 percent portfolio decline, spending flexibility, and your safety bucket.
- [09:20] Transition to scenario two, early retirement before age 65, and why health insurance is such a critical factor.
- [13:30] Cash in the bank versus long-term growth.
- [17:20] Healthcare shocks and long-term care needs that can show up later in retirement.
- [21:00] How HSAs, disability insurance, and understanding your deductibles and out-of-pocket maximums fit into the picture.
