Kiplinger recently published an article about testing your investment portfolio for the worst case scenario. "Moshe Milevsky, associate professor of finance at York University in Toronto, believes financial advisers should test whether a client's portfolio can withstand a market event that has a 1% chance of occurring. In a Journal of Financial Planning article, Milevsky calls these market events 'black swan' scenarios, a term applied to rare, often devastating, episodes, and explained by Nassim Taleb in his book The Black Swan: The Impact of the Highly Improbable[link added]."  Source: Kiplinger

This is basically step 5 in TES's 5 steps to economic survival.  There Chris explains that you should:

Prepare for different scenarios.  Sometimes money becomes worthless. Sometimes stocks don't recover.  Sometimes you can't find a new job. Prepare for every eventuality that you can think of.  What happens if wego into a hyper inflationary depression?  What happens if you lose yourjob?  What happens if the stock market crashes?  What happens if allthree occur at the same time?  Be prepared.  Never assume the worstcan't happen, instead assume it will.  Try to think of absolutelyridiculous scenarios, like events in 2012 making the world into a Mad Max typeplanet and ask yourself  how could you prepare in advance.  Yourfriends may laugh at you, but if the worst does occur, and remember ithas many times throughout human history, they'll be the ones knocking onyour door begging for a can of creamed corn.   But also keep in mindthat the world might not devolve into such a scenario.  So don't spendyour life savings on toilet paper.  Instead be smart, invest wisely, butrealize that the worst could actually occur and be prepared just incase.

According to the Kiplinger article there is a Monte Carlo computer program that can help you test out all of the worst case scenarios to see how your portfolio would fair in each situation. 

To illustrate how such a stress test would work, Milevsky describestwo hypothetical investors. In November 2007, at the start of the bearmarket, Robert, 62, and Sandra, 78, met with their financial planners.Robert had a portfolio of $950,000, with 90% allocated to stocks. Heplanned to spend $37,116 a year. Meanwhile, Sandra had $330,000 ofinvestment assets, from which she intended to spend $25,777 a year. Only25% of her portfolio was allocated to stocks.

Using Monte Carlo simulations, both investors had an 80% chance ofhaving enough money to last their lifetimes. Fast-forward two years -- aperiod that included the bear market. The 80% sustainability rate forboth portfolios plunged.

If the advisers had instead run two different tests in November 2007,they would have been better able to help their clients avert muchfinancial harm, Milevsky says. First, planners would have conducted thestandard Monte Carlo. The second test would have assumed that threeyears had passed and that both portfolios had undergone a 1-in-100market event. Advisers would have found that Robert's portfolio had a29.6% chance of lasting through retirement, compared with 53.7% forSandra's nest egg.