Can I Retire? Series — Part 11 of 12
Your plan looks good on paper. But paper is calm. Life isn’t.
What happens if the market drops 40% in your first year of retirement? What if inflation runs at 6% for a decade? What if you live to 100? What if all three happen?
A retirement plan that only works in average conditions isn’t really a plan. It’s a hope. Real plans survive stress.
The calculator on caniretire.app stress-tests your plan automatically by running it through the worst periods in market history. But understanding what it’s testing — and what you can do about it — helps you build a plan with margin.
The Big Risks
There are four main risks that can derail a retirement:
1. Sequence of returns risk. We covered this in Part 9, but it’s worth repeating: the order of returns matters as much as the average. A 40% drop in year one is devastating. The same drop in year twenty is manageable. You can’t control when crashes happen, but you can build a plan that survives them.
2. Longevity risk. The risk of outliving your money. Plan for 30 years and die at 95? You’ve got a problem. The average 65-year-old today has a 25% chance of living past 90. Couples have a 50% chance that at least one partner makes it to 90. Plan for longer than you think.
3. Inflation risk. The silent killer. At 3% inflation, your purchasing power drops by half in 24 years. At 5%, it takes 14 years. A retiree who needs $60,000 today will need $108,000 in 20 years just to maintain the same lifestyle (at 3% inflation). Plans that ignore inflation fail slowly and painfully.
4. Spending shocks. Healthcare crises. Long-term care needs. Helping family members. Major home repairs. The big rocks from Part 2 can become boulders if they hit at the wrong time.
What the Calculator Tests
The Monte Carlo simulation automatically stress-tests your plan against historical scenarios. When it runs thousands of randomized paths, some of those paths include:
Retiring into the Great Depression (1929-1932: down 64% cumulative)
Retiring into 1970s stagflation (high inflation + poor market returns for a decade)
Retiring into the dot-com crash (2000-2002: down 49%)
Retiring into the 2008 financial crisis (down 57% peak to trough)
Your success rate reflects how often your plan survives these historical stress tests. If you see 85%, that means even the worst historical sequences didn’t sink your plan most of the time — but 15% of paths still failed.
Building Margin Into Your Plan
If your success rate isn’t where you want it — or if you just want more cushion — here are the levers you can pull:
Save more before retiring. The obvious one. Every extra dollar in your portfolio is margin against bad sequences. Working one more year can add both savings and compound growth while reducing the number of retirement years to fund.
Reduce spending. A smaller gap means less pressure on your portfolio. Cutting $5,000 from annual spending is equivalent to having roughly $125,000 more saved. It’s often easier to spend less than to earn more.
Delay Social Security. Every year you delay (up to 70) increases your benefit by about 8%. That’s a guaranteed, inflation-adjusted return you can’t get anywhere else. A higher Social Security benefit shrinks your gap permanently.
Maintain flexibility in spending. Plans that assume rigid spending are brittle. If you can cut back 10-15% in bad years, your survival odds improve dramatically. The calculator’s “dynamic spending” options can model this.
Keep some cash buffer. Having 1-2 years of expenses in cash or short-term bonds means you don’t have to sell stocks during a crash. You can wait for recovery. This doesn’t show up directly in the calculator, but it’s real margin.
Consider part-time work. Even modest income in early retirement — $10,000-20,000 per year — dramatically reduces portfolio pressure during the most vulnerable years. It doesn’t have to be forever, just long enough to get past the danger zone.
The Flexibility Factor
Here’s something the numbers don’t fully capture: human adaptability.
The calculator assumes you withdraw the same inflation-adjusted amount every year regardless of market conditions. That’s the classic “constant spending” model, and it’s useful for stress testing.
But real retirees adapt. When markets crash, most people naturally cut back. They skip the big trip. They delay the car replacement. They eat out less. This flexibility isn’t in the model, but it’s real — and it’s powerful.
If your plan shows 80% success with constant spending, your actual odds are probably higher — because you’re not actually going to maintain constant spending if your portfolio drops 40%.
The calculator does offer dynamic spending options (like withdrawing a fixed percentage of your portfolio each year, which automatically adjusts to market conditions). Try running your plan with different spending strategies and see how it affects the outcomes.
What’s Your Risk Tolerance?
Ultimately, how much margin you need depends on how much uncertainty you can live with.
Some people sleep fine with an 80% success rate. They’re comfortable with the risk, they have flexibility, and they’d rather retire earlier than work for a few more years of margin.
Others need 95% to feel secure. The idea of a 1-in-5 chance of running out of money is unacceptable, even if “running out” means adjusting spending rather than literally going broke.
Neither is wrong. It’s personal.
What matters is that you understand the trade-offs. Higher success rates require either more savings, less spending, or later retirement. Lower success rates mean more risk but potentially more time or money for other priorities.
Your Homework
Run your plan in the calculator and look at the results. Then stress-test it yourself by adjusting the inputs:
What happens if you increase spending by 10%? How much does your success rate drop?
What happens if you retire two years later? How much does it improve?
What happens if you delay Social Security to 70? What’s the impact on your early years vs. later years?
Try different withdrawal strategies — constant spending vs. dynamic percentage. See which gives you more comfort.
The goal isn’t to find the perfect plan. It’s to understand how sensitive your plan is to different assumptions and build enough margin that you can handle surprises.
In Part 12, we’ll put everything together: how to read your results, make the actual decision, and know when you’re ready — or what would need to change if you’re not.
Next: Part 12 — The Decision Framework
