Quick answer
A Monte Carlo retirement simulator runs your plan through 1,000 market futures instead of one average projection, and reports the share in which your money lasts. With $150,000 saved, $1,500 a month going in, 30 years to retirement and $50,000 a year of spending, the plan succeeds in 79.7% of futures — workable, but one future in five runs dry.
How the Monte Carlo Retirement Simulator works, step by step
Enter what you have saved, what you add each month, the years until retirement, your expected return and volatility, inflation, the years of retirement, and your annual spending. The simulator then plays out 1,000 complete lifetimes: in each one, every month's return is drawn from a normal distribution centred on your average return with your volatility as its spread, contributions land while you work, and spending leaves once you retire.
Everything is computed in today's dollars. Your expected return is deflated by inflation — a 7% nominal return at 2.5% inflation becomes a 4.39% real return — and retirement spending is held constant in real terms, so every number is in money you can picture. The random sequence is seeded, so the same inputs always produce the same result: the figures in this guide are the figures the tool shows.
The median outcome is lower than a smooth projection at the same average return, and the gap is volatility drag. A portfolio that falls 20% needs a 25% gain to recover, so a swinging portfolio compounds below its arithmetic average — roughly by half the variance each year. At 12% volatility that drag is about 0.72 points a year, which is why the simulated median at retirement sits about 13% below the smooth $1,675,000 projection.
The order of returns matters as much as their average — this is sequence risk, and it is worst in the first decade of retirement. Two futures with identical average returns end very differently if one opens with a crash while you withdraw $50,000 a year: the early losses shrink the base later gains must rebuild. That is why a plan with a healthy median can still fail in one future in five.
Read the success rate first, then the band. The success rate is the share of futures that never hit zero; the tool calls 90%+ robust, 75–90% workable, 50–75% a coin flip, below 50% in need of restructuring. The band shows the middle 80% of outcomes year by year: the top edge is a lucky sequence, the bottom edge an unlucky one. A plan is only as strong as its bad paths.
The formula
Monthly: balance × (1 + real return ÷ 12 + volatility ÷ √12 × random shock) + contribution (working years) − spending ÷ 12 (retirement years). Real return = (1 + nominal return) ÷ (1 + inflation) − 1. Success rate = share of 1,000 paths never reaching zero.
Worked example — try it on the calculator above
Worked example: $150,000 saved, $1,500 a month, retire in 30 years
Start with $150,000, contribute $1,500 a month for 30 years, assume a 7% average return with 12% volatility and 2.5% inflation, then spend $50,000 a year (in today's dollars) for 30 years of retirement. A smooth projection at the 4.39% real return reaches about $1,675,000 by retirement. The simulator's median outcome is lower — about $1,456,000 — and the middle 80% of outcomes at retirement spans roughly $794,000 to $2,777,000. The plan succeeds in 79.7% of futures; the median path ends with roughly $1,475,000 still invested, while in the worst tenth of futures the money runs out before the 30 retirement years are up. That gap is exactly what this tool exists to show.
Frequently Asked Questions
Why is the simulated median lower than a normal projection?
Volatility drag. A 20% loss needs a 25% gain to undo, so a swinging portfolio compounds below its average return — roughly by half the variance each year. Over 30 years at 12% volatility, the median outcome in the example lands about 13% under the smooth projection. Any calculator that only shows the average path is showing you a future more optimistic than the typical one.
What success rate should I aim for?
Most planners treat 85–95% as robust and 70–85% as workable with flexibility — the ability to trim spending in a bad first decade of retirement is worth several points of success rate by itself. This tool draws the lines at 90% (robust), 75% (workable) and 50% (a coin flip). Below 70%, change the plan, not the hope: save more, spend less, or retire later, in whichever order hurts least.
What volatility should I enter?
Roughly 15–17% for an all-stock portfolio — Vanguard research puts the long-run annualised standard deviation of US equities in that range, and AAII measured about 14.3% across rolling 12-month periods since 1970. Use 10–12% for a balanced stock/bond mix and 5–7% for a conservative one. Volatility is the input people most often set too low, and it is the one that drives the bad paths.
Does the simulator include taxes and Social Security?
No — it models the investment portfolio only, in today's dollars. Treat Social Security or a pension as a reduction in the spending figure: if a pension covers $20,000 of a $50,000 spending target, enter $30,000. Taxes differ too much by account type for a single switch to be honest, so they are left to the tax calculators.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.