General aviation pilot reported misreading the altimeter and descending too close to terrain; prompting a low altitude alert from ATC. Reporter became reoriented and initiated a climb to a safe altitude.

Narrative

Altitude Deviation Following GPS LossWhile operating under IFR; I was initially cleared to climb to 7;000 feet. During the climb; at approximately 3;500 feet MSL; I experienced a loss of GPS signal. This was an anticipated possibility based on known coverage gaps in the area; but it still introduced stress and uncertainty. I advised ATC of the GPS signal loss and proposed to remain on my current heading; expecting signal restoration within the next 15 to 20 miles. The controller responded affirmatively and issued a new clearance: what I heard as 'retain 4;200 feet.'I asked the controller to repeat the clearance; as I was unsure I had heard correctly. The second transmission again sounded like 'retain four thousand two hundred feet.' Though 'retain' is not a standard ATC phrase for altitude assignments; I interpreted it as a mispronunciation or radio distortion of 'maintain.' I read back 'retain 4;200' and began transitioning toward what I believed was the assigned altitude.At this point; I made a critical error. I misread my altimeter and interpreted my current altitude as 4;500 feet when I was in fact still at 3;500. Believing I needed to descend to 4;200; I instead descended to 3;200 feet. I continued on this heading and altitude; thinking I was complying with the clearance.A few minutes later; I noticed that nearby terrain appeared higher than expected for an IFR cruise altitude. This visual cue suggested something was off; but I initially discounted it; still believing I was at or near 4;200 feet. Shortly afterward; the controller issued a low altitude alert and instructed me to 'climb immediately.' At that point; I re-examined my altimeter and realized I had been 1;000 feet lower than I believed. I initiated an immediate climb; returned to a safe altitude; and resumed the flight without further incident.Chain of Events and Contributing Factors:GPS failure initiated a higher workload environment and uncertainty about navigation and ATC support. ATC issued a nonstandard-sounding clearance ('retain 4;200 feet'); which led to confusion. Perceived clearance accepted and read back without confirming the standard terminology ('maintain'). Altimeter misread due to stress and tunnel vision: I believed I was 1;000 feet higher than I was. Incorrect descent initiated from 3;500 to 3;200 feet under the mistaken impression I was descending to 4;200. Visual cues of terrain mismatch were noticed but not acted on. ATC low altitude alert triggered immediate recognition of the error and correction.Human Performance Considerations:Perception: Misinterpretation of a nonstandard word ('retain') as a clearance. In unfamiliar wording; my brain attempted to 'fit' the message into an expected structure. Judgment: I did not question the operational logic of an ATC clearance to 4;200 feet in a mountainous area while GPS was lost. I failed to pause and ask if this made sense from a terrain clearance perspective. Decision: I proceeded with what I thought was a descent to 4;200 feet; based on an altimeter misread; without re-confirming my actual altitude or verifying it with multiple cues (e.g.; charted terrain clearance; backup altitude source). Action: The descent was initiated and maintained based on faulty assumptions and visual inattention to the altimeter's thousands pointer.Quality of Performance Factors: Elevated cognitive load from equipment failure and uncertainty about ATC response. Distraction and rushed interpretation of ambiguous ATC communication. Stress-induced narrowing of attention (tunnel vision) leading to instrument scan degradation. Delay in acting on visual terrain cues due to overconfidence in altitude awareness.Corrective Actions and Preventive Measures: Verbal Clarification Discipline: In the future; I will verify any ambiguous ATC clearance by restating in standard phraseology--e.g.; 'Confirm maintain four thousand two hundred feet?' Altitude Verification Habit: I will double-check altimeter indications against VSI trend and cross-check with terrain awareness; especially after a mode change such as GPS loss. SOP for GPS Failure: I will treat GPS failure in IMC as a workload escalation trigger. This will prompt me to slow my decision tempo; re-evaluate terrain clearance and MVA exposure; and consider requesting vectors or returning to VFR as appropriate. Terrain Cue Integration: If the visual picture does not align with my understanding of altitude; I will treat that as a red flag rather than a background observation and investigate immediately. Stress and Mode Awareness: I will actively recognize when system degradations introduce human factors risks and adapt my scanning; communication; and decision-making strategies accordingly.Root Cause Summary: This deviation stemmed from a combination of high workload following a GPS signal loss; misinterpretation of unclear ATC phraseology; and stress-induced misreading of the altimeter. These compounded into an incorrect descent below MEA in mountainous terrain; which was only corrected after ATC intervention. The primary contributing factors were: Unexpected ATC phrasing. Incomplete situational awareness during an instrument scan lapse. Human error in interpreting altimeter data under stress. Delay in acting on visual cues that conflicted with mental expectations. With improved communication practices; better terrain cross-checks; and proactive stress response protocols; I believe this type of error is preventable in the future.