How to stress test retirement strategy amid Inflation, market downturn

Connie Gores was in her mid-50s, with one daughter in college and another newly graduated, when she became keenly focused on preparing for retirement. 

Gores, who worked in higher education and was a college president, met with a financial advisor set up by her former employer during the financial crisis of 2008. “The conversation changed my life,” she recalled from her North Carolina home. 

She asked the advisor to project what her financial life in retirement would look like with the benefits and savings she had at the time. “He said to me, ‘Well, I just want to tell you that right now, as it sits, you will not have enough money to live the way you want to live, and you’ll have basically Social Security and a little more.” 

It was a wake-up call, Gores said. 

Her mother had worked in hourly jobs until she was 82, got sick and died three months later. “That is not the life I wanted,” Gores said. “I wanted to have a different kind of actual retirement.”

She and her advisor talked about different strategies and came up with a plan to save and invest her money. She started contributing the maximum to her workplace retirement plan and to a Roth IRA. She stuck with the plan, reviewing it annually over the next decade, and was able to retire at 65 — several years earlier than she had expected. 

“Staying the course” is often cited as a key retirement savings strategy by financial advisors. Yet, that can be tough for many workers as they try to stomach a dramatic plunge in the stock market. The S&P 500 Index, for example, lost 20% in the first six months of this year, the worst mid-year performance in over a half a century. 

“It is hard emotionally when you go online and you see your account value just dropping, dropping, dropping, but I encourage everybody to stay focused,” said Shelly-Ann Eweka, a certified financial planner and the senior director of financial planning strategy at TIAA.

Yet, many Americans are unprepared. About 63% of workers admit they don’t know as much as they should about retirement investing, according to a recent survey by Transamerica Center for Retirement Studies. Only 35% work with a professional financial advisor and just 29% have a written plan, the survey found.