NEWS & RESOURCES

Authored by: Jason Underwood, CFP, Wealth Advisor

Even the best-laid financial plans can feel shaky when the economy hits a rough patch. Between market swings, inflation, and rising interest rates, uncertainty can make anyone wonder—is my plan strong enough to withstand it all?

That’s where a financial “stress test” comes in. Just like banks test their systems to make sure they can survive economic shocks, you can do the same with your personal finances. A stress test helps reveal how your plan might hold up under pressure—so you can make adjustments now, rather than reacting later.

Start with a few “what if” scenarios. Ask yourself: what if the market dropped 20%? What if you or your spouse lost a job for six months? What if inflation stayed higher for longer? By mapping out different situations, you’ll see how much your plan could bend—or break—under stress.

Your advisor can run simulations that model these changes and estimate their impact on your retirement projections, cash flow, or portfolio longevity.

Revisit your emergency fund. Economic uncertainty is a good reminder to check your safety net. Most people should keep three to six months of essential expenses in cash or cash equivalents, but that amount might be higher if you’re self-employed or nearing retirement. Having enough liquidity gives you flexibility when the unexpected happens.

Check your income sources. If your plan depends heavily on market performance, consider diversifying income streams. For retirees, that might mean balancing portfolio withdrawals with Social Security, pensions, or annuities. For working professionals, it could involve building side income or shoring up savings to reduce pressure during a job transition.

Reassess risk tolerance. Your risk tolerance might have changed since you first built your portfolio. A market downturn—or even the fear of one—can make you realize your comfort level isn’t what it used to be. Adjusting your investment mix to align with your true tolerance can help you stay disciplined when volatility hits.

Look at taxes and timing. During stressful markets, tax efficiency matters more than ever. Rebalancing, realizing capital losses, or adjusting contribution timing can strengthen your plan without requiring more savings. A financial planner can help identify these opportunities so your money works harder for you.

Don’t forget your goals. Uncertain times can cloud judgment, leading to reactive decisions. A stress test helps you zoom out and see whether you’re still on track for what matters most—retirement, education funding, or leaving a legacy. Sometimes the outcome is reassuring: your plan might already be more resilient than you think.

The bottom line: A stress test isn’t about predicting the future—it’s about preparing for it. Reviewing your plan with your advisor now can give you confidence and control, even when the headlines are uncertain.

Rebalancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.