Question 1

What is a Monte Carlo retirement simulation?

Accepted Answer

Monte Carlo simulation runs thousands of randomised market scenarios — each with different annual returns drawn from a normal distribution — to calculate what percentage of scenarios end with enough money. A 90%+ success rate is generally considered safe for retirement planning.

Question 2

What success rate should I aim for in retirement planning?

Accepted Answer

Financial planners typically target 85–95% Monte Carlo success rate. A 90% success rate means 9 in 10 simulated market paths leave you solvent at the end of your horizon. Higher success rates require larger savings or lower withdrawal rates.

Question 3

How does market volatility affect retirement success?

Accepted Answer

Higher volatility increases sequence-of-returns risk — a market crash early in retirement can be devastating even if long-term returns are good. Our simulator captures this by varying returns year by year, not just using an average.

Question 4

What is a good expected return and volatility for stock portfolios?

Accepted Answer

US equity has historically returned ~7% real (10% nominal) with ~15–18% annual standard deviation. A diversified 60/40 portfolio might use 6–7% return and 10–12% volatility. Conservative: 5% return, 8% volatility.

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