You can stress test your retirement plan, just as your doctor can challenge your heart function or a bank can run scenarios that might cause it to fail. A retirement plan is only as good as its ability to weather financial storms, such as shocks to the stock market. A good stress test will also forecast whether there’s a risk you could run out of money or you need to course correct to avoid money troubles in retirement.
Financial stress tests, of course, aren’t new. In response to the 2008 financial crisis, the Federal Reserve began stress testing the nation’s biggest banks to see if they had enough capital to absorb losses and keep lending to borrowers during stressful economic conditions.
