Stress Test Your Plan

Can Your Retirement Plan Pass a ‘Stress Test?’

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In our working years, we work and save toward retiring someday, creating our retirement story. Our story may include daily golfing, living somewhere different, or participating in activities we enjoy each day that help to fill our minds with a picture of our retirement. But the plan of relocation and nonstop action should be stress tested to ensure they are possible, primarily if a recession occurs early in retirement.

Stress Testing Living and Leisure Costs

If you plan to relocate, visit the area one to three years before moving at least three times. Plan to stay for up to two weeks and participate in the activities you plan to when you move there. Dine out, contact a realtor or attend open houses, grocery shop, and behave like you’re a permanent resident, even in the off-season of your desired location.

You may be surprised at the high cost of living or comfortable you can afford the lifestyle you anticipate. Those destinations that you find favorable for vacation may not suit you permanently. Researching medical care, access to family members, and affordability requires research on your part to give you detailed information before you make a life-changing (and portfolio impacting) decision.

Often, retirees want to live in an area with other retirees but must be aware of how the neighborhood may change over the next decade when homes change ownership, becoming different demographically. State and local government taxes (SALT) are not always favorable in high retirement destination states and will impact your portfolio as much as your daily living expenses.

Stress Testing Your Portfolio

Test your retirement assets well ahead of retiring by having scenarios run based on your current portfolio allocations in a downward market. Have you determined which investments to liquidate that will allow the minimal impact to those with low valuations? If not, a new financial plan is needed to help establish how to customize your asset allocations based on your expected spending during a depreciated stock market. A simple way to think of this is, which bucket do you intend to draw from to cover your expenses with minimal impact to your portfolio if a financial crisis were to happen during your retirement?

If you want to stress test your retirement plan and need help to guide your decisions, feel free to contact our office to get started. Pre-planning for challenging events now and in retirement is a crucial part of the financial planning process.

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