Most retirement stress tests focus solely on single-year stock market crashes, overlooking a historically more corrosive regime: stagflation, where persistent consumer price inflation collides with flat or mildly negative nominal portfolio returns—mirroring the economic environment between 1973 and 1981.
Mathematically, real purchasing power is governed by the Fisher equation: 1 + r_real = (1 + r_nom) / (1 + i_t), where r_nom represents nominal portfolio return and i_t denotes annual inflation. During a conventional deflationary recession, consumer prices remain flat, meaning a retiree’s required dollar withdrawal W_t stays stable while waiting for equities to recover. Under stagflation, however, the portfolio suffers a relentless two-sided pincer: nominal asset returns stagnate near zero (-8%, -11%, +4%, +2%, -3%, +5%, +3%), while annual inflation of 5.5% to 7.0% forces nominal living withdrawals to compound upward every single year according to W_t = W_0 × (1 + i)^t.
Consider a 64-year-old retiree holding $1,700,000 and drawing $85,000 per year. Over seven consecutive years of 5.5% inflation, required nominal withdrawals surge by (1.055)^7 - 1 = +45.5%, climbing to $123,648 per year simply to purchase the exact same basket of food, utilities, property taxes, and insurance. Simultaneously, stagnant nominal portfolio growth means those rapidly escalating nominal withdrawals must be funded by liquidating a rising fraction of underlying portfolio shares each year—even though financial headlines may not register a dramatic single-day market crash.
Generic bank calculators fail this stress test because they hardcode a benign 2.5% CPI assumption alongside a smooth 7.0% nominal return, mathematically guaranteeing an uninterrupted +4.4% real return every year.
This template pairs a 5.5% inflation regime with a seven-year stagnant nominal return sequence (-8, -11, 4, 2, -3, 5, 3) starting at age 64 on a $1,700,000 portfolio. Load the preset to observe how real purchasing power erodes and test inflation-adjusted spending caps.