Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A modeled success rate across many historical-style return paths describes sensitivity to the sequence and pattern of returns, not a literal probability that a specific plan will or won't work. It's the difference between this plan holds up under a range of plausible histories and an actual prediction of what will happen.
Before you rely on it
What to check
Read the result as a stress test showing how sensitive the plan is to bad sequences, not as a percentage chance of running out of money in real life.
The common error
Where people go wrong with retirement monte carlo calculator
Quoting the modeled success rate as a literal probability of retirement success. The paths are modeled scenarios based on historical patterns, not a forecast of what markets will actually do going forward.
Sensitivity evidence
How expected annual return changes the modeled success rate
| Expected annual return | Modeled success rate | Median ending balance |
|---|---|---|
| 4.0% | 23.8% | $0.00 |
| 5.0% | 41.6% | $0.00 |
| 6.0%worked example | 54.5% | $114,524 |
| 7.0% | 67.3% | $843,142 |
| 8.0% | 80.2% | $2,029,579 |
Every input, tested
Which input moves the modeled success rate most
| Input | Tested from | To | Modeled success rate at each end | Swing |
|---|---|---|---|---|
| Retirement horizon | 22.0 years | 38.0 years | 79.2% to 38.6% | 40.6% (75%) |
| Expected annual return | 5.0% | 7.0% | 41.6% to 67.3% | 25.7% (47%) |
| Annual withdrawal inflation | 1.5% | 3.5% | 65.3% to 42.6% | 22.8% (42%) |
| Starting portfolio | $900,000 | $1,100,000 | 44.6% to 61.4% | 16.8% (31%) |
| First-year withdrawal | $40,500 | $49,500 | 62.4% to 45.5% | 16.8% (31%) |
| Annual volatility | 10.0% | 14.0% | 58.4% to 48.5% | 9.9% (18%) |
Two variables at once
Modeled success rate by expected annual return and starting portfolio
| Expected annual return \ Starting portfolio | $800,000 | $1,000,000 | $1,200,000 |
|---|---|---|---|
| 4.0% | 2.0% | 23.8% | 45.5% |
| 5.0% | 12.9% | 41.6% | 55.4% |
| 6.0% | 26.7% | 54.5% | 75.2% |
| 7.0% | 44.6% | 67.3% | 80.2% |
| 8.0% | 55.4% | 80.2% | 87.1% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Starting portfolio | $1,000,000 |
| First-year withdrawal | $45,000 |
| Expected annual return | 6.0% |
| Annual volatility | 12.0% |
| Annual withdrawal inflation | 2.5% |
| Retirement horizon | 30.0 years |
| Modeled success rate | 54.5% |
| Median ending balance | $114,524 |
Where the inputs come from
Starting portfolio and first-year withdrawal describe the plan. Expected annual return and annual volatility characterize the portfolio: a stock-heavy mix has volatility near 12% to 16%, a bond-heavy one much lower. Annual withdrawal inflation is how fast the withdrawal rises each year, and the retirement horizon is how many years the money must last. This page runs 101 return paths from the return and volatility you enter, not thousands of random ones.
Using the modeled success rate in a real decision
Lower the withdrawal until the success rate reaches a level you are comfortable with, such as 85% to 90%, or add flexibility to cut spending after bad years.
When the result stops applying
The paths are deterministic and evenly spaced, so the result is an illustration of dispersion and not a probability forecast. Real returns have fat tails, serial patterns and changing inflation that a simple normal model misses. The model excludes taxes, fees and changes in spending. A single success rate can hide how badly the failing cases fail and when.
What to compare it with
See how timing matters on the sequence of returns risk page, and compare a fixed-dollar plan with the investment withdrawal calculator. The retirement goal page sets the target, and the withdrawal order calculator shows the tax effect. Consider a guardrail approach that cuts withdrawals after big losses.
People also ask
Frequently asked questions
What does a success rate of 54% mean?
That about half of the modeled return paths ran out of money before the end of the horizon, so the withdrawal is too high for comfort under these assumptions.
What success rate should I aim for?
Many planners target 80% to 90% or more, but flexible spenders can accept lower rates since they can cut spending when markets fall.
Is this a true Monte Carlo simulation?
It uses 101 evenly spaced deterministic paths around your return and volatility, which illustrates the spread of outcomes but is not a random simulation.