May 2026 : 7 min read
Every instinct says don't go there. Here's why going there is exactly the right thing to do - and what usually happens when you do.
I want to tell you about a Tuesday afternoon in February.
I was about eight months into planning my early retirement. The spreadsheet was open - as it often was. The numbers were fine - as they usually were. And the anxiety was present - as it almost always was.
I'd been doing what I'd been doing for months. Running the plan forward under reasonable assumptions. Checking that the ISA bridge was sufficient. Confirming that the pension would grow adequately if left untouched. Reassuring myself that the State Pension floor was solid.
And then I stopped. And I asked myself the question I'd been carefully avoiding for eight months.
What if it all goes wrong?
Not as a rhetorical device. Not as a passing thought to be quickly reassured away. As a genuine, specific, sit-with-it question. What does wrong actually look like? What's the realistic worst case? And could I live with it?
What followed was one of the most useful hours of the entire eighteen-month planning process. And it had nothing to do with the numbers being good. It had everything to do with finally looking at what I'd been avoiding.
Why we avoid the worst case
The avoidance is completely rational. If you're anxious about something, looking directly at it feels like it will make the anxiety worse. The instinct is to look away - to reassure yourself that the plan is solid, that the scenarios have been tested, that everything is probably going to be fine.
But here's what I've come to understand about retirement anxiety specifically. The vague fear of "something going wrong with the plan" is almost always more frightening than the specific fear of "markets falling 30% in year two and the pot reducing to £X."
The first is unbounded. It can be as bad as your imagination makes it. It lives in the space between what you know and what you're afraid to examine. In that space it can grow without limit - fuelled by every article you half-read about market crashes, every forum thread about running out of money, every 3am thought that the plan might not be as solid as it looks in daylight.
The second has a specific shape. It can be examined. It can be modelled. It can be responded to.
Deliberately converting the unbounded fear into a bounded one - by looking at it directly and giving it a specific shape - is the mechanism by which this exercise reduces anxiety. Not by making the fear go away. By making it specific enough to address.
What the realistic worst case actually looks like
Before getting into the exercise itself, it's worth being clear about what "worst case" means in this context.
Not the worst conceivable case. The scenario where everything fails simultaneously in an improbable cascade - markets crash 50%, inflation runs at 15%, the State Pension is abolished, the house burns down - is not a useful planning scenario. It's catastrophising dressed up as rigour. It produces paralysis rather than clarity.
The worst realistic case is different. It's the most adverse scenario that is genuinely plausible given historical evidence and current circumstances. For a UK early retiree with a diversified pension pot and ISA bridge, that looks something like this.
Markets fall significantly in the first two to three years of retirement. The pension pot, left untouched and intended to grow during the bridge years, instead falls in value. The ISA bridge, being drawn on to fund living costs, is also affected. Inflation runs higher than the base case for a sustained period, eroding the real value of cash savings. The State Pension age rises by one or two years before you reach it.
Any one of those is plausible. All of them together in the same period is genuinely adverse - but not impossible. That's the scenario worth modelling.
How to do the exercise
The exercise has three steps. Done properly it takes about an hour the first time.
Step one - write down the worst realistic scenario in specific numbers
Not in general terms. In numbers.
What would a 30% market fall in year two do to your pension pot? If your pot is £550,000 and it falls 30%, it becomes £385,000. Not vague market turmoil - a specific number you can see and work with.
What would that do to your draw-down capacity? At 3.5% the £385,000 pot generates £13,475 per year rather than the £19,250 you'd planned for. Again - specific.
What would sustained higher inflation do to the real value of your cash savings over five years? At 5% annual inflation, £200,000 of cash savings is worth approximately £157,000 in real terms after five years. Specific.
What if the State Pension age rises to 68 for your cohort, adding an extra year to the bridge? That's one additional year of living costs from your accessible capital. In your case, approximately £22,000.
Write all of this down. Actual numbers on paper. The specific worst case rather than the imagined one.
Step two - ask what you would actually do
This is the most important step and the one most people skip.
If all of that happened - the market fall, the inflation, the additional bridge year - what would you actually do? Not what would you feel. What would you do?
In my case the honest answer was this. I would reduce discretionary spending. The holidays would become shorter or closer. The home projects would be deferred. The restaurant meals would be fewer. I would look at whether part-time or consultancy work made sense to supplement the income. I would draw the pension slightly earlier than planned if the pot had recovered sufficiently.
None of those responses is catastrophic. None of them represents the end of the retirement plan. They represent an adjustment - a re-calibration of the plan in response to changed circumstances.
And here is the thing that the exercise consistently reveals. Most early retirees, when they work through the specific worst case and the specific responses available to them, discover that the adjusted version of the plan is still fundamentally okay. Not the version they'd planned. But okay.
The gap between "not as good as planned" and "catastrophic" is wider than the unexamined fear suggests.
Step three - ask honestly: could I live with this?
The final question is the most important one. Not "is this the outcome I want?" - obviously it isn't. But "could I live with it? Could I look at this adjusted life and find it genuinely acceptable rather than disastrous?"
For me the honest answer was yes. The reduced-spending, maybe-doing-some-part-time-work, slightly-less-comfortable version of retirement that the worst case produced was still recognisably a good life. Still mortgage free. Still with time and presence and freedom. Still considerably better than continuing to work until 67 and potentially missing the most active years.
That recognition - that the worst realistic case was still fundamentally liveable - was the anxiety-reducing moment. Not the reassurance that the worst case probably wouldn't happen. The knowledge that if it did happen, it would still be okay.
What I actually found on that Tuesday afternoon
I want to be specific about what happened when I did this exercise, because the specificity is what makes it useful rather than abstract.
I modelled a scenario where markets fell 25% in year two and took three years to recover to previous levels. I assumed inflation averaged 4% rather than the base case 2.5%. I added a year to the bridge.
The pension pot in this scenario, at age 65 rather than the planned figure, was approximately £580,000 rather than the base case £724,000. Meaningfully lower. But still substantial.
The ISA and savings, having been drawn on more heavily during the extended bridge, were approximately £180,000 rather than the base case £265,000.
The combined position was less comfortable than planned. But when I modelled the income from it, the picture was still workable. Two State Pensions eventually arriving. Pension draw-down within the personal allowance. ISA withdrawals on top. The PLSA comfortable retirement standard for a couple - £60,600 per year - was still achievable without drawing down the pot aggressively.
I'd spent eight months being vaguely afraid of this. An hour of looking at it directly revealed that it was manageable.
That's not luck. That's what the exercise almost always produces. Because the realistic worst case, examined honestly, is almost always less frightening than the imagined one.
When the exercise produces a different result
I want to be clear about something. As I've mentioned throughout my blog posts, I'm in a more fortunate position than most. This exercise doesn't always produce comfort. For some people the worst case examination reveals a genuine problem - a plan that doesn't hold up under adverse conditions, a gap between income and need that the adjusted version can't bridge.
If that's what the exercise reveals for you, that's important and useful information. It means the plan needs work before you stop rather than after. It means the margin of safety is insufficient. It means adding more to the ISA bridge, working slightly longer, reducing the target spending level, or considering semi-retirement rather than a full stop.
A plan that fails the worst case examination is not a reason to abandon early retirement. It's a reason to strengthen the plan.
The exercise is useful in both directions. When it produces comfort, it reduces anxiety. When it produces discomfort, it produces specific and actionable information about what needs to change.
Both outcomes are better than not doing it.
A practical note
The worst case scenario exercise works best when done on paper rather than in a spreadsheet. Spreadsheets invite tinkering - adjusting variables, running multiple iterations, getting lost in the mechanics. Paper forces simplicity. You're writing down the scenario in plain language and the response in plain language. The clarity that comes from that simplicity is part of the point.
Do it once properly. Revisit it annually or when something significant changes. Don't do it every week - that's the checking loop dressed up as planning.
And when you've done it - when you've looked at the worst realistic case and asked honestly whether you could live with it - write down the answer. Not just the numbers. The answer to the question: could I live with this?
That written answer is the thing to come back to at 3am. Not the spreadsheet.
Related posts
This post is part of the Anti-Panic Toolkit series. The main article - Ten Things That Actually Reduced the Stress of Planning Early Retirement - covers nine other practical techniques alongside this one.
For the financial mechanics of stress-testing the plan: Building Your Own Early Retirement Plan - A Step-by-Step Framework
For the draw-down strategy and sequencing risk: How to Actually Draw Down Your Retirement Pot
For the doubt that persists even when the worst case is manageable: Have I Made the Right Decision to Retire Early?
Tony writes about his personal journey to early retirement at freebefore65.co.uk. He is not a financial adviser. All content reflects his own experience and research and should be taken as a starting point for your own thinking, not as professional advice.
Add comment
Comments