Is Your Retirement Income Sustainable? How to Stress-Test It

Planning for retirement is about more than just saving enough; you also need to ensure that your income will last as long as you do.

With people living longer, markets moving unpredictably, and inflation quietly eroding purchasing power, it’s no wonder that the biggest concerns that I hear from my retired clients are, “when are they going to run out of money?” and “can they maintain their lifestyles?”

That’s where retirement income stress-testing comes in. Just as you’d stress-test an investment portfolio for risk, your retirement income plan should be tested against various scenarios to see how well it holds up.

What Is Retirement Income Stress-Testing?

Stress-testing is the process of modelling how your retirement plan would cope under different adverse conditions such as; market downturns, high inflation, unexpected expenses, or living longer than expected.

Now stress testing won’t prevent every risk, but it will show you where you might be vulnerable and how to prepare.

Why Is Stress-Testing Important?

A comfortable retirement relies not only on how much you’ve saved, but on how your income strategy responds to changing conditions. At F&O Wealth Management when we work with clients who are retiring, these are a few of the scenarios that we test and talk through with our clients:

• Market Volatility: What if there’s a major market downturn early in retirement?

• Inflation: Could rising prices erode the value of your income over time?

• Longevity: What if you live well into your 90s or beyond – will your pot stretch?

• Unexpected Costs: How would a health scare or family emergency affect your finances?

If your plan only works in perfect conditions, sadly, it’s not a robust plan.

How to Stress-Test Your Plan

Here’s how you can start assessing your plan’s resilience:

• Use Cashflow Modelling Tools
  A good adviser will use cashflow modelling to show how your finances might evolve under different conditions, and more importantly help you visualise the impact of various risks.

• Review Withdrawal Strategies
  Consider flexible withdrawal strategies. For example, reducing withdrawals during market dips or building a cash buffer to draw on during downturns.

• Diversify Income Sources
  Balance income from drawdown pensions, annuities, ISAs, state pension, and other assets to spread risk.

• Plan for Inflation
  Factor in higher-than-average inflation rates in your assumptions. Consider inflation-linked products or assets that tend to rise with inflation (like certain equities or property).

• Build in Contingency
  Leave some margin for the unknown – whether it’s in the form of accessible savings or downsizing later in life.

Working With a Financial Adviser

Stress-testing isn’t just about running numbers – it’s about translating risk into real-life decisions. An experienced financial adviser can help you:

• Understand how your spending, investment growth, and lifespan affect your retirement income.

• Optimise withdrawals to minimise tax and preserve capital.

• Identify blind spots in your current plan.

• Create a strategy that adapts over time.

Final Thoughts

Retirement should be a time of freedom, time to enjoy yourself after so much hard work and saving, not financial anxiety. By stress-testing your income plan, you will give yourself the best chance of enjoying the years ahead, whatever life throws at you.

If you’d like help reviewing or building a resilient retirement plan, get in touch for a personalised conversation.

• This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

• The Financial Conduct Authority does not regulate Cashflow Planning.