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Participant Corner: Smart Portfolio Stress Testing

Participant Corner: Smart Portfolio Stress Testing

September 21, 2023

Each month we provide our plan sponsor clients with a participant ready communication piece. All participant corner documents are saved to your Fiduciary Briefcase. Once logged into your account, click on Briefcase > Participant Services > Employee Memos. 

To download a copy of this Participant Corner Memo, click here to login to your fiduciary briefcase, or contact info@definedplanadvisors.com to get a pdf version that you can distribute to your employees.

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You've been diligent—saving, monitoring retirement accounts, consulting your advisor. But are you prepared for life's uncertainties? Your retirement plan relies on assumptions: savings, investment duration, inflation, and returns. Life, however, loves throwing curveballs—job loss, health issues, financial shocks.

That's where stress testing comes in, your safety net in this unpredictable journey. Ready for a stress test?

Retirement Planning and Stress Testing Quiz

  1. What does stress testing typically involve in financial planning?
    1. Implementing the same assumptions for returns, inflation, and financial stability.
    2. Ignoring assumptions and relying solely on historical data.
    3. Introducing various assumptions related to returns, inflation, and personal financial stability.
    4. Exclusively focusing on returns without considering other factors
  2. What resource should you use when evaluating the assumptions in your retirement plan to fully grasp the complexity of economic forces and life’s unexpected turns?
    1. Online Calculators
    2. Consult with your Financial Advisor
    3. Historical Records
    4. A Crystal Ball
  3. When addressing potential risks highlighted during stress testing, what strategies are mentioned for managing these risks and uncertainties?
    1. Stick to your original financial plan regardless of the stress test results.
    2. Consult an astrologer for financial guidance.
    3. Increase your investment in high-risk assets.
    4. Discuss possible changes with your financial advisor, consider diversification, and explore insurance options.

Sources

Key:

  1. (C) Introducing various assumptions related to returns, inflation, and personal financial stability.
  2. (B) Consult with your Financial Advisor
  3. (D) Discuss possible changes with your financial advisor, consider diversification, and explore insurance options.