Retirement Probability Of Success Calculator

Monte Carlo Simulation Formula:

\[ Success Probability = Monte Carlo Simulations (95\% \text{ if lasts 30 years}), Portfolio survival odds. \]

Simulations (count):

iterations

Portfolio Value:

Annual Withdrawal:

Expected Annual Return:

Portfolio Volatility:

Retirement Years:

years

Success Probability (%):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What Is The Retirement Probability Of Success Calculator?

The Retirement Probability Of Success Calculator uses Monte Carlo simulations to estimate the likelihood that your retirement portfolio will last throughout your retirement years. It considers market volatility, expected returns, withdrawal rates, and time horizon to provide a probabilistic assessment of portfolio survival.

2. How Does The Calculator Work?

The calculator performs Monte Carlo simulations:

\[ Success Probability = Monte Carlo Simulations (95\% \text{ if lasts 30 years}), Portfolio survival odds. \]

Where:

\( Simulations \) — Number of Monte Carlo iterations (typically 10,000+)
\( Portfolio Value \) — Initial retirement savings
\( Annual Withdrawal \) — Yearly withdrawal amount
\( Expected Return \) — Average annual portfolio return
\( Volatility \) — Portfolio standard deviation/risk
\( Retirement Years \) — Duration of retirement period

Explanation: The simulation runs thousands of potential market scenarios to determine what percentage of outcomes result in portfolio survival.

3. Importance Of Retirement Planning

Details: Understanding your retirement success probability helps in making informed decisions about savings rates, investment strategies, and withdrawal plans to ensure financial security throughout retirement.

4. Using The Calculator

Tips: Enter realistic assumptions for returns and volatility based on your asset allocation. Use conservative estimates for more reliable results. All values must be positive and within reasonable ranges.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good success probability?
A: Typically, 85-95% is considered good. Above 95% may indicate overly conservative spending, while below 75% suggests high risk of portfolio depletion.

Q2: How many simulations are needed for accuracy?
A: 10,000 simulations provide good accuracy. More simulations increase precision but require more computation time.

Q3: Does this account for inflation?
A: This basic model uses nominal returns. For real (inflation-adjusted) analysis, use real returns and real withdrawal amounts.

Q4: What about Social Security and pensions?
A: These can be incorporated by reducing the annual withdrawal amount by expected pension/SS income.

Q5: How often should I recalculate?
A: Annually, or when there are significant changes to portfolio value, spending needs, or market expectations.