Why Stress Testing Your Financial Plan Matters More Than Ever
Most people think of a financial plan as a fixed roadmap: “Here’s what I have, here’s what I’ll save, and here’s when I can retire.” But in reality, life doesn’t always follow the plan, and the outside world is unpredictable.
That’s why I recently ran a stress test on every client’s financial plan.
A stress test looks at your plan through the lens of what if:
What if the stock market drops 20%?
What if taxes go up?
What if health care costs increase in retirement?
What if you live 10 years longer than expected?
What if your spending increases in retirement?
What if your Social Security benefit is reduced?
These are uncomfortable questions, but they’re the ones that matter most.
Why Stress Testing Is Important
When markets are strong and things feel steady, it’s easy to assume you’re on track. But real financial confidence comes from knowing that even if things go wrong, your plan can adapt.
Stress testing reveals how resilient your plan is across different scenarios. Sometimes it shows you’re in great shape. Other times, it uncovers a blind spot that’s easy to fix now but devastating if ignored.
Everyone’s Risk Factor Is Different
What I found after running these analyses is this: no two clients have the same risks.
Some clients are most exposed to market risk because their portfolio is heavily invested in equities.
Others face longevity risk outliving their money because they have longer life expectancies, a lower Social Security benefit, or less exposure to the markets.
Some are vulnerable to tax increases, especially if they hold large pre-tax retirement accounts.
A few have rising spending risks due to travel goals, inflation-sensitive budgets, or health care concerns.
This is why cookie-cutter advice doesn’t cut it. Your plan isn’t just about the numbers; it’s about your lifestyle, values, family, and the assets you’ve accumulated. Your biggest risk is unique to you.
Real-Life Examples: Different Plans, Different Risks
Here are two real client scenarios that show just how different financial risks can be:
Client A: Longevity + Social Security Risk
This client retired early after a successful career and has a solid nest egg. On the surface, things look great. But when we ran the stress test, two risks stood out:
Longevity risk: If they live longer than expected (which is very possible given family history and good health), their portfolio gets stretched thin in later years.
Social Security timing risk: They planned to claim benefits early, but the analysis showed that could leave them with significantly lower lifetime income, especially if one spouse lives much longer than the other.
For this client, we modeled different claiming strategies and built the plan around a longer life expectancy, giving them more peace of mind and reducing the chance they’d outlive their savings.
Client B: No Risks? But Wait…
This client passed every stress scenario with flying colors. Market drops, higher inflation, medical costs, and longer life expectancy, their plan stays strong in every case.
You might think that’s the end of the story, but in their case, the real risk is under-spending.
They’ve been so disciplined and conservative that they may miss out on enjoying the wealth they’ve built. Worse yet, in Oregon, their estate could be subject to a large amount of Oregon’s state-level estate tax, which kicks in at just $1 million.
For this client, we’re having important conversations about how to intentionally enjoy their money, support causes they care about, and smart gifting strategies to reduce future estate taxes.
What You Can Do
Use this information to think differently about the future and your unique risks. If your plan hasn’t been tested, now’s the perfect time to change that.
Want to see how your financial plan holds up under pressure? I offer complimentary stress tests for qualified individuals. It’s simple, and it could make all the difference. Schedule a strategy session here.
