This Monte Carlo simulation supports planning for financial goals and related spending. Multiple cashflow goals can be applied based on different life stages, and the simulation supports the use of linear glide path to transition from a career stage growth portfolio into a retirement stage income portfolio. The following simulation models are supported for portfolio returns:

**Historical Returns**- Simulate future returns by randomly selecting the returns for each year based on available historical returns**Statistical Returns**- Simulate future returns based on the mean, volatility and correlations of portfolios assets**Forecasted Returns**- Simulate future returns based on any forecasted mean and standard deviation of assets**Parameterized Returns**- Simulate future returns based on the specified statistical distribution (single stage only)

Monte Carlo simulation results for 10000 portfolios with $500,000 initial portfolio balance using available historical returns data from Jan 1994 to Dec 2017. 24-year linear glide path was used to transition from starting portfolio to retirement portfolio. The simulated inflation model used normal distribution with 3.22% mean and 3.13% standard deviation based on the parameters. The generated inflation samples were uncorrelated with simulated asset returns. The simulation time period was constrained by the available history for Global Bonds (Unhedged) [Jan 1994 - Mar 2018].

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Asset Class | Allocation |
---|---|

US Stock Market | 52.00% |

Global ex-US Stock Market | 28.00% |

Total US Bond Market | 16.00% |

Global Bonds (Unhedged) | 4.00% |

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Asset Class | Allocation |
---|---|

US Stock Market | 26.00% |

Global ex-US Stock Market | 14.00% |

Total US Bond Market | 48.00% |

Global Bonds (Unhedged) | 12.00% |

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Purpose | Type | Starts In | Ends In | Frequency | Times | Total | Success |
---|---|---|---|---|---|---|---|

Retirement | Contribute $4,580 | 1 month | 24 years | Monthly | 288 | $1,319,040 | 100.00% |

Living | Withdraw 4.00% of portfolio | 24 years | 49 years | Annually | 26 | - | 100.00% |

Total is the sum of expected cashflows in present dollars |

10th Percentile | 25th Percentile | 50th Percentile | 75th Percentile | 90th Percentile | |
---|---|---|---|---|---|

Time Weighted Rate of Return | 5.63% | 6.40% | 7.25% | 8.05% | 8.77% |

Portfolio End Balance (nominal) | $8,944,965 | $11,470,281 | $15,323,008 | $20,360,462 | $26,170,401 |

Portfolio End Balance (inflation adjusted) | $1,790,360 | $2,337,854 | $3,191,452 | $4,353,217 | $5,763,341 |

Maximum Drawdown | -31.97% | -28.27% | -28.27% | -28.27% | -21.33% |

Maximum Drawdown Excluding Cashflows | -40.00% | -33.08% | -25.98% | -22.17% | -21.25% |

10000 portfolios out of 10000 simulated portfolios (100.00%) survived all withdrawals. |

Notes on results:

- Monte Carlo simulation uses historical data and thus assumes that the future will, to some extent, mimic the past. The actual future results may vary.
- The probability of success is based on the number of simulations the portfolio survives with a positive end balance.
- Maximum drawdown statistics are calculated from simulated monthly balances.
- The results assume annual rebalancing of portfolio assets at the end of each year. Taxes and transaction fees are not taken into account.
- Past performance is not a guarantee of future returns and data and other errors may exist. See Disclaimer and Terms of Use
- Glide path based portfolio allocation changes are done as part of annual rebalancing
- Withdrawals are done at the start of each specified time period (fixed amounts before percentage based)
- Contributions are done at the end of each specified time period

Name | Total US Bond Market | Global Bonds (Unhedged) | Global ex-US Stock Market | US Stock Market | Expected Annual Return | Annualized Volatility |
---|---|---|---|---|---|---|

Total US Bond Market | 1.00 | 0.63 | 0.01 | 0.00 | 5.18% | 3.57% |

Global Bonds (Unhedged) | 0.63 | 1.00 | 0.36 | 0.18 | 6.16% | 6.85% |

Global ex-US Stock Market | 0.01 | 0.36 | 1.00 | 0.83 | 6.87% | 16.66% |

US Stock Market | 0.00 | 0.18 | 0.83 | 1.00 | 10.79% | 14.77% |

Asset correlations and return vs. risk statistics are based on monthly returns from Jan 1994 to Dec 2017 |