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ILLUSTRATIVE EXAMPLE

What if markets fall and inflation stays high?

See how a market shock changes the plan without pretending to predict the news. The accounts, amounts, and answer below are fictional.

LSAMPLE ANSWERILLUSTRATIVE

THE SHORT ANSWER

I’d build the nine-month cash reserve before adding more stock exposure. In this example, the market drop and higher inflation shrink your projected cushion from $200,000 to $45,000. Age 60 still works, but a large expense could force you to sell investments while they’re down.

KEY NUMBERS

Stress decline−15%
Cushion after stress$45,000
Cash target9 months

WHAT MATTERS

  • The plan is more affected by selling during a downturn than by one year of higher inflation.
  • Continuing contributions during the decline improves the recovery path.
  • A larger cash reserve protects near-term choices without requiring a prediction about markets.

POSSIBLE NEXT STEPS

  • Build the cash reserve before increasing investment risk.
  • Keep automatic contributions running through the stress scenario.
  • Revisit the retirement date only if the downturn overlaps with an income loss.
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