Financial Goals

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 a 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)

Planning Type

Years to Retirement

Portfolio Type

Initial Amount

$ .00

Simulation Period in Years

Simulation Model

Use Historical Volatility

Use Full History

Start Year

End Year

Bootstrap Model

Block Min. Years

Block Max. Years

Circular Bootstrapping

Distribution

Degrees of Freedom

Expected Return

Volatility

Sequence of Returns Risk

Worst Years At Retirement

Inflation Model

Inflation Mean

Inflation Volatility

Intervals

Percentile Intervals

Return Intervals

Asset 1

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Expected return for asset 1 %

Expected volatility for asset 1 %

Asset 2

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Expected return for asset 2 %

Expected volatility for asset 2 %

Asset 3

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Expected return for asset 3 %

Expected volatility for asset 3 %

Asset 4

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Expected return for asset 4 %

Expected volatility for asset 4 %

Asset 5

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Expected return for asset 5 %

Expected volatility for asset 5 %

Asset 6

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Expected return for asset 6 %

Expected volatility for asset 6 %

Asset 7

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Expected return for asset 7 %

Expected volatility for asset 7 %

Asset 8

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Expected return for asset 8 %

Expected volatility for asset 8 %

Asset 9

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Expected return for asset 9 %

Expected volatility for asset 9 %

Asset 10

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Expected return for asset 10 %

Expected volatility for asset 10 %

Total

Total allocation for portfolio %

Asset 1

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Expected return for asset 1 %

Expected volatility for asset 1 %

Asset 2

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Expected return for asset 2 %

Expected volatility for asset 2 %

Asset 3

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Expected return for asset 3 %

Expected volatility for asset 3 %

Asset 4

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Expected return for asset 4 %

Expected volatility for asset 4 %

Asset 5

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Expected return for asset 5 %

Expected volatility for asset 5 %

Asset 6

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Expected return for asset 6 %

Expected volatility for asset 6 %

Asset 7

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Expected return for asset 7 %

Expected volatility for asset 7 %

Asset 8

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Expected return for asset 8 %

Expected volatility for asset 8 %

Asset 9

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Expected return for asset 9 %

Expected volatility for asset 9 %

Asset 10

Select asset 10

Enter percentage allocation for asset 10 %

Expected return for asset 10 %

Expected volatility for asset 10 %

Total

Total allocation for portfolio %

Goal #1

Type

Cashflow type

$ Amount .00

Percentage %

Inflation Adjusted

Rolling average periods periods

Smoothing rate % of previous

Starts

Years till start years

Frequency

Repeat Type

Times times

Goal #2

Type

Cashflow type

$ Amount .00

Percentage %

Inflation Adjusted

Rolling average periods periods

Smoothing rate % of previous

Starts

Years till start years

Frequency

Repeat Type

Times times

Goal #3

Type

Cashflow type

$ Amount .00

Percentage %

Inflation Adjusted

Rolling average periods periods

Smoothing rate % of previous

Starts

Years till start years

Frequency

Repeat Type

Times times

Monte Carlo Simulation Results

Monte Carlo simulation results for 10000 portfolios with $100,000 initial portfolio balance using available historical returns data from Jan 1994 to Dec 2017. 35-year linear glide path was used to transition from starting portfolio to retirement portfolio. The simulated inflation model used historical inflation with 2.22% mean and 1.19% standard deviation based on the Consumer Price Index (CPI-U) data from Jan 1994 to Dec 2017. The generated inflation samples were correlated with simulated asset returns based on historical correlations. The available historical data for the simulation inputs was constrained by Global Bonds (Unhedged) [Jan 1994 - Nov 2018].
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Portfolio Allocations

Starting Portfolio
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%
Save portfolio »

Retirement Portfolio
Asset Class	Allocation
US Stock Market	13.00%
Global ex-US Stock Market	7.00%
Total US Bond Market	64.00%
Global Bonds (Unhedged)	16.00%
Save portfolio »

Financial Goals

Financial Goals
Purpose	Type	Starts In	Ends In	Frequency	Times	Total	Success
Career Savings	Contribute $1,500	1 month	35 years	Monthly	420	$630,000	100.00%
College	Withdraw $40,000	12 years	15 years	Annually	4	-$160,000	100.00%
Retirement Spending	Withdraw $3,500	35 years	49 years and 11 months	Monthly	181	-$633,500	99.98%
Total is the sum of expected cashflows in present dollars

Summary Statistics

Summary Statistics
	10th Percentile	25th Percentile	50th Percentile	75th Percentile	90th Percentile
Time Weighted Rate of Return	5.29%	6.10%	6.94%	7.79%	8.52%
Portfolio End Balance (nominal)	$2,934,364	$4,417,934	$6,582,118	$9,553,548	$13,286,092
Portfolio End Balance (inflation adjusted)	$1,000,005	$1,491,136	$2,194,067	$3,180,239	$4,352,660
Maximum Drawdown	-36.45%	-28.50%	-24.91%	-16.99%	-13.41%
Maximum Drawdown Excluding Cashflows	-39.79%	-33.01%	-25.77%	-18.67%	-15.40%
9998 portfolios out of 10000 simulated portfolios (99.98%) 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

Simulated Assets - Correlations and Returns

Simulated Assets - Correlations and Returns
Name	US Stock Market	Global ex-US Stock Market	Total US Bond Market	Global Bonds (Unhedged)	Inflation	CAGR	Expected Annual Return	Annualized Volatility
US Stock Market	1.00	0.83	0.00	0.18	0.03	9.58%	10.79%	14.77%
Global ex-US Stock Market	0.83	1.00	0.01	0.36	0.05	5.38%	6.87%	16.66%
Total US Bond Market	0.00	0.01	1.00	0.63	-0.12	5.12%	5.18%	3.57%
Global Bonds (Unhedged)	0.18	0.36	0.63	1.00	0.01	5.91%	6.16%	6.85%
Inflation	0.03	0.05	-0.12	0.01	1.00	2.21%	2.22%	1.19%
Asset correlations and return vs. risk statistics are based on monthly returns from Jan 1994 to Dec 2017

Expected Annual Return

Expected Annual Return
Percentile	1 Year	3 Years	5 Years	10 Years	15 Years	20 Years	25 Years	30 Years	40 Years	50 Years
10th Percentile	-9.90%	-3.38%	-0.52%	2.25%	3.46%	4.19%	4.60%	4.87%	5.17%	5.29%
25th Percentile	-1.17%	3.28%	3.95%	5.21%	5.66%	5.89%	6.04%	6.13%	6.12%	6.10%
50th Percentile	13.20%	9.26%	8.80%	8.16%	7.95%	7.74%	7.57%	7.44%	7.14%	6.94%
75th Percentile	19.53%	14.41%	12.75%	10.97%	10.04%	9.52%	9.08%	8.73%	8.15%	7.79%
90th Percentile	23.55%	18.16%	15.86%	13.20%	11.91%	11.01%	10.37%	9.85%	9.05%	8.52%

Annual Return Probabilities

Annual Return Probabilities
Return	1 Year	3 Years	5 Years	10 Years	15 Years	20 Years	25 Years	30 Years	40 Years	50 Years
>= 0.00%	74.55%	83.39%	88.86%	95.88%	98.71%	99.62%	99.93%	99.97%	100.00%	100.00%
>= 2.50%	70.20%	76.98%	80.78%	89.15%	93.79%	96.72%	98.10%	98.95%	99.77%	99.92%
>= 5.00%	70.20%	68.92%	70.45%	76.53%	80.34%	84.09%	86.84%	88.84%	91.75%	93.17%
>= 7.50%	66.15%	58.50%	57.25%	56.23%	55.49%	53.63%	51.17%	48.84%	40.33%	32.65%
>= 10.00%	53.63%	46.18%	42.07%	33.31%	25.45%	19.27%	13.43%	8.72%	2.39%	0.52%
>= 12.50%	53.63%	34.31%	26.42%	13.91%	6.80%	2.73%	1.02%	0.22%	0.00%	0.00%

Financial Goals

Monte Carlo Simulation Results

Portfolio Allocations

Financial Goals

Summary Statistics

Simulated Assets - Correlations and Returns

Expected Annual Return

Annual Return Probabilities

Glide Path