Traditional retirement calculators often assume a steady average return on investments, but financial markets rarely behave so predictably. Monte Carlo analysis introduces randomness to model the ups and downs you could encounter in the real world. By running many simulations with varying returns, it produces a range of possible outcomes, giving you an idea of how likely your savings are to last throughout retirement.
The simulation generates a series of yearly portfolio returns drawn from a normal distribution with a specified mean and standard deviation. For each run, the program repeatedly calculates the new balance as prev
Expected return is often based on historical averages of your asset allocation, while volatility reflects how much returns typically swing from year to year. Stocks have higher volatility than bonds, for instance. You can adjust these values to explore optimistic or conservative cases. More simulation runs yield smoother results but take longer to compute. This tool uses a simple random generator for clarity, so results are approximate.
Each gray line in the chart represents a single simulated path of your portfolio. The blue line shows the average balance across all runs. If many lines dip below zero before the end year, there’s a substantial chance you could outlive your savings. Conversely, if most lines stay well above zero, your withdrawal rate is likely sustainable. Remember that even a small probability of depletion might prompt adjustments if you value a high degree of security.
Monte Carlo models rely on assumptions about return distributions that may not capture market extremes. Real-world returns can exhibit fat tails, meaning severe downturns occur more often than a normal distribution predicts. Inflation, taxes, and fees also reduce purchasing power but are not included here. Treat this calculator as an educational aid rather than a precise forecast.
If the simulation shows a high likelihood of running out of money, you might consider reducing annual spending, increasing savings before retirement, or allocating more of your portfolio to growth-oriented investments. Alternatively, delaying retirement by a few years gives your investments more time to compound while shortening the withdrawal period.
Professional financial planners use more complex models that incorporate different asset classes, sequence-of-return risk, and changing withdrawal amounts over time. Nonetheless, a basic Monte Carlo approach provides valuable insight. By experimenting with different withdrawal rates, return assumptions, and volatility levels, you can identify scenarios that offer a reasonable balance between lifestyle goals and longevity of funds.
This simulator uses straightforward JavaScript to generate random returns. While it lacks the sophistication of dedicated financial software, it illustrates the core idea clearly. You might run 100 or even 1,000 simulations to see a distribution of possible portfolio paths. After each run, the remaining balance, if any, is recorded for the final year, producing an overall success rate—the percentage of runs that never hit zero.
No model can predict the future with certainty. Market shocks, unexpected expenses, or changes in life expectancy all influence retirement success. Use this tool to spark conversation and planning with a professional advisor, and revisit your assumptions regularly. Realistic scenarios often require balancing safe withdrawals with the desire for growth to stay ahead of inflation.
Our Monte Carlo Retirement Simulator offers a hands-on way to explore how volatility and spending affect portfolio longevity. By viewing multiple possible futures at once, you gain a deeper understanding of risk and can make more informed decisions about saving and investing for retirement.
Compute net present value and internal rate of return for up to five years of cash flows to assess investment profitability.
Estimate the occupancy percentage needed for a rental property to cover expenses and reach break-even.
Compute the interest on a rental security deposit over time. Enter the principal, annual interest rate, and dates to estimate how much should be returned.