Monte Carlo Simulation

This online Monte Carlo simulation tool provides a means to test long term expected portfolio growth and portfolio survival during retirement withdrawals, i.e., whether the portfolio can sustain the planned withdrawals during the retirement years. The following simulation models are supported for portfolio returns:

  • Historical Returns - Simulate future annual returns by randomly selecting the returns for each year from the database of available annual returns
  • Statistical Returns - Simulate future annual returns based on the mean and standard deviation of the selected asset allocation's actual historical return
  • Parameterized Returns - Simulate future annual returns based on the specified statistical distribution

You can choose from several different withdrawal models including:

  • Fixed annual withdrawal or contribution - Apply a fixed annual withdrawal or contribution. Yearly inflation adjustments are by default done for the specified withdrawal or contribution amount based on the selected model.
  • Fixed annual percentage - Withdraw a fixed percentage of the portfolio balance annually. This model ensures that the portfolio never runs out, but the annual spending amount varies based on the portfolio growth.
  • Life expectancy based annual withdrawal - This model withdraws a variable percentage of the portfolio balance based on life expectancy. This is the RMD approach where the withdrawal percentage is 1 / Life Expectancy.