Income Lab launching retirement stress test tool for advisors

Key features of the test include the ability to see how a retirement plan would perform through real historical scenarios such as the Great Depression, 1970s stagflation, the dot-com bubble and the global financial crisis.

Software provider Income Lab announced the release of a retirement stress test that shows how retirees can navigate historical periods of high inflation or market volatility by adjusting their spending.

According to Income Lab, the new stress test tool is available as part of the company’s retirement income management software. Key features of the test include the ability to see how a retirement plan would perform through real historical scenarios such as the Great Depression, 1970s stagflation, the dot-com bubble and the global financial crisis. After seeing the results, the client could then compare how different spending and investment strategies might perform in different economic environments.

“In the past, retirement stress testing primarily focused on how things get worse when portfolios take a hit, causing significant anxiety in clients. This new approach to realistic stress testing builds confidence by showing how adjustments – usually minor and temporary ones – can get retirees through the rough patches without major changes in their lifestyle,” Income Lab CEO Johnny Poulsen said in a statement.

Income Lab says this tool is unique because it focuses on “realistic retiree behavior, like spending adjustments, instead of on portfolio failure.” The company says it successfully used the tool prior to last week’s official release in client meetings during the market turmoil in late 2022 and 2023.

“It gives clients a lot of confidence to see how their plan would handle some of the worst times in history and to understand that retirement isn’t pass/fail,” Justin Fitzpatrick, Income Lab’s chief investment officer, said in the statement. “This helps advisors move the conversation away from success and failure and into a can-do conversation about adjustments.”