Monte Carlo Simulation

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

You can choose from several different withdrawal models including:

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Monte Carlo Simulation Results

Monte Carlo simulation results for 10000 portfolios with $1,000,000 initial portfolio balance using available asset class data from 1972 to 2016. The historical return for the selected allocation from 1972 to 2016 was 10.14% mean return with 11.34% standard deviation of annual returns. The results are based on simulated nominal returns and specified inflation adjusted withdrawals ($45,000/year). The simulated inflation model used historical inflation with 4.06% mean and 3.12% standard deviation based on the Consumer Price Index (CPI-U) data from 1972 to 2016.

Monte Carlo simulation results
Allocation Withdrawal Years Median End Balance 25th Percentile End Balance 75th Percentile End Balance Max. Drawdown Probability of Success
60.00% US Stock Market
40.00% 10-year Treasury
$45,000 30 $5,036,180 $1,810,623 $9,667,913 Mean: -33.61%
Median: -22.18%
StdDev: 28.09%
89%
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 annual balances including withdrawals/contributions.
  • The results assume annual rebalancing at the end of each year. Taxes and fees are not taken into account.
  • Data and other errors may exist. See Disclaimer and Terms of Use