Retirement Monte Carlo Calculator

What Monte Carlo analysis does for retirement planning

A standard retirement projection gives a single answer — your portfolio is projected to last 28 years or run out in year 24. This misses the fact that real returns are volatile, so the outcome depends heavily on which years are good and which are bad. Monte Carlo analysis runs the projection hundreds or thousands of times with different random return sequences and reports the percentage of scenarios where the portfolio survives the full horizon. A 90% success probability means 9 out of 10 return paths produce a portfolio that lasts; a 50% probability means a coin flip.

How this tool approximates Monte Carlo

Full Monte Carlo simulation requires running thousands of randomised trials, which is computationally intensive. This calculator uses a different approach: it references the published results of historical safe-withdrawal-rate studies (Trinity Study, updates by Bengen, Pfau, and others) that effectively encode Monte Carlo results into withdrawal-rate success tables. For a 60/40 stock-bond portfolio, those studies give success probabilities at various withdrawal rates over various horizons. The calculator interpolates from these benchmarks to estimate success probability for your specific inputs.

The core driver: initial withdrawal rate

The single biggest predictor of retirement success is the initial withdrawal rate (annual withdrawal divided by starting portfolio). At 3% or below, survival is near-certain in almost all historical sequences. At 4%, the classic benchmark, about 95% of historical 30-year sequences survive. At 5%, the success rate drops to roughly 70-75%. At 6%, to roughly 50%. At 7%+, the probability of depletion becomes uncomfortably high for most households. The calculator shows where your specific withdrawal rate lands on this curve.

Why historical data has limits

Historical SWR studies assume future returns will resemble past returns. The last 100 years included the US as the dominant global equity market, a long era of declining interest rates, and broadly favourable demographics. Forward returns may be lower if any of those tailwinds reverse. Some planners adjust historical SWR numbers downward by 0.5-1 percentage point to account for this uncertainty — a 3.5% withdrawal rate becomes the new 4% under that adjustment. The calculator uses classical historical benchmarks; apply your own conservatism if you believe forward returns will be lower.

Sequence-of-returns risk

The order matters enormously. A portfolio that sees strong returns in its first decade of retirement tends to survive even aggressive withdrawals, because the base grows before withdrawals deplete it. A portfolio that sees bad returns in its first decade is much more likely to fail — even if long-run average returns are identical. This is why many planners recommend glidepath allocation (shifting to more conservative allocations in the 5 years before and after retirement) or cash buffers that allow riding out early drawdowns without selling into a falling market.

What to do with the probability

A 95%+ success probability is comfortable. 85-95% is typical for well-planned retirements. Below 85%, reducing is one approach — the withdrawal rate or extending working years. Below 70%, the plan is risky enough that adjustments are usually needed — delaying retirement by even two years often moves the probability meaningfully because it shrinks the withdrawal horizon and gives the portfolio more time to grow. The probability is a decision input, not a guarantee — even 99% has a 1-in-100 failure tail.