1. What is Retirement Success Rate?

The Retirement Success Rate represents the probability that your retirement portfolio will last throughout your retirement years without running out of money. It's calculated using Monte Carlo simulations that model various market scenarios.

2. How Does Monte Carlo Simulation Work?

The calculator uses Monte Carlo simulation:

Where:

• \( \text{Successful Simulations} \) — Simulations where portfolio lasts entire retirement period
• \( \text{Total Simulations} \) — Total number of market scenario simulations
• \( \text{Market Returns} \) — Randomly generated based on historical averages and volatility
• \( \text{Withdrawal Rate} \) — Annual percentage withdrawn from portfolio

Explanation: The simulation tests your retirement plan against thousands of possible market scenarios to determine the probability of success.

3. Importance of Success Rate Calculation

Details: Understanding your retirement success rate helps in financial planning, risk assessment, and making informed decisions about savings, investments, and withdrawal strategies.

4. Using the Calculator

Tips: Enter your current portfolio value in USD, expected retirement duration in years, number of simulations (higher = more accurate), and annual withdrawal rate as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is considered a good success rate?
A: Generally, 85-95% is considered good. Below 75% may indicate higher risk of outliving your savings.

Q2: How many simulations should I run?
A: 5,000-10,000 simulations typically provide reliable results. More simulations increase accuracy but take longer to compute.

Q3: What withdrawal rate is safe?
A: The 4% rule is traditional, but your safe rate depends on portfolio composition, age, and risk tolerance.

Q4: Does this account for inflation?
A: This simplified model includes average market returns but for precise planning, consider using inflation-adjusted calculations.

Q5: Can I change investment assumptions?
A: For customized assumptions about returns, volatility, and inflation, consult with a financial advisor for personalized modeling.