Monte Carlo Retirement Planner

The Retirement Risk Nobody Talks About: Getting Unlucky Early

A 7% average return sounds the same whether the bad years come first or last. It isn't. A market crash in year two of retirement, when you're selling assets to pay bills, does far more damage than the same crash at year fifteen.

This calculator models that uncertainty across 1,000 simulated retirements so you can see your actual probability of success, not just an optimistic average.

Monte Carlo Retirement Planner

Run 1,000 simulated retirements using random market returns to see your real probability of success -- not just an average. Every run is different. That uncertainty is the point.

Portfolio & Timeline

Current portfolio valueTotal investable assets today -- 401k, IRA, brokerage, etc. Do not include home equity unless you plan to liquidate it.

Current age vs retirement ageThe gap between these drives your accumulation phase. Each extra year of saving and compounding significantly improves success probability.

Planning horizonThe age your portfolio must survive to. Set this higher than your life expectancy -- running out at 88 when you live to 94 is the risk you are modeling. 90-95 is a common conservative target.

Annual contributionsHow much you add to the portfolio each year before retirement. Set to 0 if already retired.

Current portfolio value$500,000

Current age45

Retirement age65

Planning horizon (age)90

Annual contributions (pre-retirement)$20,000

Portfolio Mix

Stocks (equities)Historical US stock market: ~10% average annual return, ~15% standard deviation. Higher return, higher volatility. The simulation draws a new random return each year from this distribution.

Bonds (fixed income)Historical US bonds: ~4.5% average return, ~6% standard deviation. Lower return, lower volatility. Good for reducing sequence-of-returns risk in early retirement.

Cash / money market~2.5% average return, very low volatility. Acts as a buffer but drags long-term returns. Most advisors recommend keeping 1-2 years of expenses in cash at retirement.

Must sum to 100%The blended return and volatility shown below are the weighted average used in the simulation. Adjust the mix to see how your asset allocation affects success probability.

Stocks 60%

Bonds 30%

Cash 10%

Total: 100% ✓

Blended expected return7.7%

Blended volatility (std dev)10.7%

Spending & Income

Annual spending in retirementTotal annual expenses in today's dollars. The simulation inflates this each year. Include housing, food, travel, healthcare. A common rule of thumb: 70-80% of pre-retirement income.

Social Security / pension incomeYour combined annual Social Security and pension income at retirement age, in today's dollars. Annual -- not a lifetime total. The simulation inflates this each year alongside your spending. For example, if you expect $24,000/yr from SS, enter $24,000. Even modest SS income significantly reduces portfolio withdrawal pressure and improves success probability.

Inflation rateAnnual rate at which your spending grows. 3% is a reasonable long-term assumption. Note that healthcare inflation often runs 5-6% -- consider a higher rate if healthcare is a large share of your budget.

Net withdrawalSpending minus SS/pension = what the portfolio must fund each year. This is the number that actually drives depletion risk. Reducing it by $5,000/yr has a bigger impact than many people expect.

Annual spending in retirement (today's $)$60,000

Social Security + pension (annual, today's $)$20,000

Inflation rate3.0%

Scenario Settings

Sequence of returns riskA major bear market in the first 5-10 years of retirement is far more damaging than the same crash later, because you are selling depressed assets to fund spending. The "bad decade first" scenario stress-tests this by reducing returns by 30% in years 1-10.

Number of simulationsMore simulations = smoother, more reliable probability estimate. 1,000 runs is standard for retirement planning. 5,000 gives very stable results but takes a moment longer to compute.

Sequence of returns scenario

Simulations

Success Definition

Target ending balanceThe minimum portfolio value you want to have at your planning horizon. Set to $0 if you just need the money to last. Set higher if you want to leave a legacy or keep a cushion for late-life care costs.

Minimum floor balanceA run is marked as a failure if the portfolio drops below this amount at any point during retirement -- even if it recovers later. Use this if you need a guaranteed minimum cushion at all times (e.g. $50k for emergencies).

Your success target %The probability of success you personally consider acceptable. Most financial planners target 85-90%. Conservative planners use 95%. The gauge will turn green, amber, or red relative to your target rather than fixed thresholds.

Target ending balance (legacy / cushion)$0

Minimum floor (failure if portfolio drops below)$0

Your success target85%

--%

probability of success

Running simulation...

Median balance at 80

50th percentile outcome

Median balance at 90

50th percentile outcome

10th pct at horizon

worst 10% of outcomes

Net annual withdrawal

annual spending minus annual SS/pension

Withdrawal rate

% of portfolio at retirement

Median failure age

when portfolio runs out

Portfolio value over time (percentile bands)

90th pct

Median (50th)

10th pct

When does the portfolio run out? (failed runs only)

What-if scenarios vs baseline

Spend 10% less per year--

Retire 2 years later--

Add $100,000 to portfolio now--

Reduce volatility by 20% (more bonds)--

Methodology: Returns are simulated using a lognormal (multiplicative) model. The blended return you enter is the expected arithmetic annual return; the simulator converts this to a continuous log-return internally so compounded growth matches your input. Portfolio volatility uses a covariance model (stock-bond correlation 0.20) rather than a simple weighted average. Real markets exhibit fat tails, serial correlation, and regime changes not captured here. Results are illustrative, not predictive. Disclaimer: This calculator is for educational purposes only and does not constitute financial advice. Consult a qualified financial advisor for personalized retirement planning.

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The Retirement Risk Nobody Talks About: Getting Unlucky Early

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