Becoming retirement ready: How to stress-test your plan with an advisor

Retirement marks one of life’s most significant transitions, offering a unique blend of excitement and opportunity. As you prepare for this new stage, it is essential to ensure your financial plan is resilient and adaptable to changing circumstances or unexpected life events. Regularly stress-testing your retirement plan can provide valuable insights and help you make the adjustments necessary to secure a confident and successful retirement.

Key scenarios to test for stress

Navigating the complexities of retirement savings can be a significant source of anxiety, potentially due to factors such as unexpected life events and market volatility. According to our 2023 Retirement Savings and Spending Study, 64% of baby boomers reported moderate to high levels of stress about their retirement savings. Preretirees also struggle with preparing for retirement, experiencing similar stress levels. Addressing these concerns is crucial for those approaching retirement. This sentiment is echoed across the industry, with a related Vanguard survey¹ indicating in regards to that 40% of investors across the board experience financial stress regards to their future.

While concerns about having enough money to retire are common, partnering with a knowledgeable advisor can not only help to confirm that you’re saving enough, but also help to ensure that your overall plan is tailored to meeting your long-term goals. By stress-testing your retirement plan, an advisor can help you to evaluate its resilience against real-world scenarios and then introduce key levers—such as diversifying your investment vehicles, changing your asset allocation, saving more, or trimming spending—to improve your plan’s likelihood of success.

Here are some key scenarios that can and should be considered:

• Market Volatility: Advisors often simulate corrections and prolonged bear markets to assess how a portfolio might weather significant declines. This process helps uncover vulnerabilities that could impact your income stream or portfolio longevity.
• Health Care Costs: With long-term care expenses now exceeding six figures per year for nursing home care in certain areas, planning for health care and potential long-term care costs and inflation is essential. Advisors can model different health care cost and inflation rate scenarios to ensure your plan can absorb these potential shocks.
• Early Retirement: Life sometimes throws curveballs, whether it be an unexpected career change, health issue, or family need. Advisors can help you test the impact of retiring five or even 10 years earlier than planned, ensuring your strategy remains resilient if your timeline shifts.

How advisors simulate and solve

• T. Rowe Price advisors use their expertise and advanced tools to help investors navigate financial uncertainties. A Monte Carlo simulation tests financial plans against hundreds of potential market and spending scenarios. This technique provides insights into the likelihood of achieving your financial goals.

Advisors also focus on optimizing an investor’s tax situation by reviewing the makeup of their different accounts—taxable, tax-deferred, and tax-free—and identifying ways to make withdrawals more efficient both to reduce taxes during retirement and to increase after-tax legacy later on. Advisors are there to provide reassurance that financial plans remain strong and effective, regardless of life’s challenges.

The benefits of being proactive

Even modest adjustments—such as retiring a year later, delaying Social Security, rebalancing your portfolio, or increasing your savings rate—can have a meaningful impact on your retirement security. Studies show that proactive planning can boost the resilience of your retirement strategy, helping you weather downturns or unexpected expenses.

Here are some key benefits:

• Enhanced Resilience and Adaptability: Fortify your plan against market volatility and unexpected expenses by identifying vulnerabilities early, ensuring it remains flexible and adaptable to life changes and surprises while keeping your income stream intact.
• Informed Decision-Making: Gain insights into potential impacts on your financial future, allowing for optimized investment and savings strategies.
• Opportunity for Growth: Discover ways to optimize your portfolio and improve strategies, leading to growth and better outcomes.

Beyond the numbers, the greatest benefit of a well-tested, advisor-backed plan is the peace of mind it provides. Life is full of surprises, but with preparation and proactive stress-testing, the unexpected can be viewed as manageable detours rather than roadblocks. You don’t have to face these challenges alone; a T. Rowe Price advisor can help you to achieve your retirement goals while offering reassurance and guidance along the way.

Steps investors can take today

For those eager to take steps to ensure their financial security, T. Rowe Price offers a suite of tools and resources to help you evaluate and strengthen your retirement plan:

• Retirement Income Calculators: Get a high-level snapshot of your retirement readiness based on your basic savings, spending, and investment profile.
• If you want more personalized advice, consider exploring Retirement Advisory Service. You can set an appointment with an advisor, get the planning process started, and benefit from the following tools:
  • “What-If” Scenario Planners: Explore how changes in market returns, retirement age, or health care costs could affect your plan.
  • Downloadable Checklists: The Retirement Confidence Conversation Checklist helps guide productive discussions with your advisor and ensures you’re prepared for every stage of retirement planning

T. Rowe Price provides tailored advice for every life stage, from those just beginning to save to preretirees refining their strategies to retirees seeking income and legacy solutions.

Get started

Ready to stress-test your retirement plan?

• Schedule a consultation with a T. Rowe Price advisor to review your strategy and identify opportunities for improvement.