Stress Test Your Retirement Plan: Inflation, Longevity & Market Shocks

Retirement isn’t just about having “enough”, it’s about making sure your money can handle what’s next. Market drops, inflation spikes, and longer lifespans can all strain even well-built plans. That’s why stress testing matters.

Here’s how we help clients at BFG Wealth Management put their retirement strategy through realistic scenarios – before life does it for them.

1. Inflation That Sticks Around

The past few years proved that inflation isn’t always temporary. Even 3–5% inflation over a decade can quietly erode purchasing power.

What to review:

·       Run your plan with higher-than-average inflation rates

·       Make sure essential expenses still track out 25–30 years

·       Confirm your portfolio includes assets built to adjust with inflation: equities, real estate, TIPS (Treasury Inflation-Protected Securities)

2. Living to 95 (or Beyond)

A 25-year retirement is common. A 30+ year one is increasingly likely. If your plan only runs to age 85, that’s a problem.

What to review:

·       Update your longevity assumptions to 95–100

·       Look at Social Security timing – delaying to 70 often makes sense

·       Rethink your drawdown strategy if it’s still set to a fixed 4% rule

3. Big Market Drop Early in Retirement

This one hits hard. If markets fall early in retirement and you’re withdrawing from your portfolio, it’s harder to recover.

What to review:

·       Model a 20–30% drop in your first five retirement years

·       Use a “bucket” system: short-term cash, mid-term income, long-term growth

·       Consider flexible withdrawal rules based on market performance

4. Healthcare and Long-Term Care Costs

Even with Medicare, out-of-pocket medical expenses are high, and long-term care isn’t covered.

What to review:

·       Budget for premiums, copays, prescriptions, dental, and vision

·       Have a funding plan for long-term care: insurance, hybrid products, or a dedicated asset bucket

·       Use HSA dollars tax-free for qualified medical costs if available

5. Tax Curveballs in Retirement

Most people expect lower taxes in retirement. Many end up in the same (or higher) brackets once RMDs and Social Security kick in.

What to review:

·       Mix of pre-tax, Roth, and taxable accounts

·       Roth conversion strategy in lower income years

·       Tax-aware withdrawal sequencing to minimize total taxes and avoid Medicare surcharges

Bottom Line

Stress testing isn’t about predicting the future—it’s about building flexibility into your plan. If your retirement strategy only works under perfect conditions, it doesn’t really work.

Want to see how your current plan holds up under pressure?

Let’s test it. CONTACT US

Note: This information is for educational purposes and should not be considered financial advice. Consult with a financial advisor for personalized guidance.

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