Use this calculator to estimate the probability of your retirement savings lasting throughout your desired retirement period, using Monte Carlo simulations to account for market volatility.
This is the age you plan for your money to last until.
Assumed to grow with inflation until retirement.
Assumed to grow with inflation during retirement.
Higher volatility means wider swings in annual returns.
Results:
// Function to generate a random number from a normal distribution using the Box-Muller transform
function generateNormalRandom(mean, stdDev) {
var u = 0, v = 0;
while (u === 0) u = Math.random(); // Converting [0,1) to (0,1)
while (v === 0) v = Math.random();
var z = Math.sqrt(-2.0 * Math.log(u)) * Math.cos(2.0 * Math.PI * v);
return z * stdDev + mean;
}
function calculateMonteCarlo() {
var currentAge = parseFloat(document.getElementById("currentAge").value);
var retirementAge = parseFloat(document.getElementById("retirementAge").value);
var lifeExpectancy = parseFloat(document.getElementById("lifeExpectancy").value);
var currentSavings = parseFloat(document.getElementById("currentSavings").value);
var annualContributions = parseFloat(document.getElementById("annualContributions").value);
var desiredSpending = parseFloat(document.getElementById("desiredSpending").value);
var avgReturn = parseFloat(document.getElementById("avgReturn").value) / 100;
var volatility = parseFloat(document.getElementById("volatility").value) / 100;
var inflationRate = parseFloat(document.getElementById("inflationRate").value) / 100;
var numSimulations = parseInt(document.getElementById("numSimulations").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
// Input validation
if (isNaN(currentAge) || isNaN(retirementAge) || isNaN(lifeExpectancy) || isNaN(currentSavings) ||
isNaN(annualContributions) || isNaN(desiredSpending) || isNaN(avgReturn) ||
isNaN(volatility) || isNaN(inflationRate) || isNaN(numSimulations)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (currentAge <= 0 || retirementAge <= 0 || lifeExpectancy <= 0 || currentSavings < 0 ||
annualContributions < 0 || desiredSpending < 0 || numSimulations <= 0) {
resultDiv.innerHTML = "All values must be positive, except for returns which can be negative.";
return;
}
if (retirementAge < currentAge) {
resultDiv.innerHTML = "Retirement Age cannot be less than Current Age.";
return;
}
if (lifeExpectancy < retirementAge) {
resultDiv.innerHTML = "Planning Horizon (Life Expectancy) cannot be less than Retirement Age.";
return;
}
if (lifeExpectancy <= currentAge) {
resultDiv.innerHTML = "Planning Horizon must be greater than Current Age.";
return;
}
var successfulSimulations = 0;
for (var i = 0; i < numSimulations; i++) {
var portfolioValue = currentSavings;
var currentAnnualContributions = annualContributions; // Contributions in today's dollars, adjusted for inflation each year
var currentDesiredSpending = desiredSpending; // Spending in today's dollars, adjusted for inflation each year
var simulationSuccess = true;
for (var year = currentAge; year < lifeExpectancy; year++) {
var annualReturn = generateNormalRandom(avgReturn, volatility);
if (year < retirementAge) {
// Accumulation phase
portfolioValue = portfolioValue * (1 + annualReturn);
portfolioValue = portfolioValue + currentAnnualContributions;
currentAnnualContributions = currentAnnualContributions * (1 + inflationRate); // Contributions keep pace with inflation
} else {
// Withdrawal phase
portfolioValue = portfolioValue * (1 + annualReturn);
portfolioValue = portfolioValue – currentDesiredSpending;
currentDesiredSpending = currentDesiredSpending * (1 + inflationRate); // Spending keeps pace with inflation
if (portfolioValue <= 0) {
simulationSuccess = false;
break; // Portfolio ran out
}
}
}
if (simulationSuccess) {
successfulSimulations++;
}
}
var probabilityOfSuccess = (successfulSimulations / numSimulations) * 100;
resultDiv.innerHTML =
"Based on " + numSimulations + " simulations:" +
"Probability of Retirement Success: " + probabilityOfSuccess.toFixed(2) + "%" +
"This indicates the percentage of simulations where your portfolio lasted until your planning horizon (" + lifeExpectancy + " years old).";
}
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font-family: 'Segoe UI', Tahoma, Geneva, Verdana, sans-serif;
background-color: #f9f9f9;
padding: 25px;
border-radius: 10px;
box-shadow: 0 4px 12px rgba(0, 0, 0, 0.1);
max-width: 700px;
margin: 30px auto;
border: 1px solid #e0e0e0;
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color: #2c3e50;
text-align: center;
margin-bottom: 20px;
font-size: 1.8em;
}
.calculator-container p {
color: #555;
line-height: 1.6;
margin-bottom: 15px;
}
.calculator-inputs label {
display: block;
margin-bottom: 8px;
color: #34495e;
font-weight: bold;
font-size: 0.95em;
}
.calculator-inputs input[type="number"] {
width: calc(100% – 22px);
padding: 12px;
margin-bottom: 15px;
border: 1px solid #ccc;
border-radius: 6px;
font-size: 1em;
box-sizing: border-box;
transition: border-color 0.3s ease;
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.calculator-inputs input[type="number"]:focus {
border-color: #007bff;
outline: none;
box-shadow: 0 0 5px rgba(0, 123, 255, 0.3);
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.calculator-inputs .input-help {
font-size: 0.85em;
color: #777;
margin-top: -10px;
margin-bottom: 15px;
padding-left: 5px;
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display: block;
width: 100%;
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color: white;
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margin-top: 20px;
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transform: translateY(-2px);
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background-color: #1e7e34;
transform: translateY(0);
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border: 1px solid #d4edda;
border-radius: 8px;
padding: 20px;
margin-top: 30px;
text-align: center;
}
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color: #28a745;
margin-top: 0;
font-size: 1.5em;
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Understanding the Monte Carlo Retirement Calculator
Retirement planning is a critical financial goal, but it's often fraught with uncertainty. Traditional retirement calculators typically use a single, fixed rate of return, which can be misleading because investment returns are rarely consistent year after year. This is where a Monte Carlo Retirement Calculator becomes invaluable.
What is a Monte Carlo Simulation?
A Monte Carlo simulation is a computer-based mathematical technique that models the probability of different outcomes in a process that cannot easily be predicted due to random variables. In the context of retirement planning, it runs thousands of different scenarios for your investment portfolio, each with varying annual returns drawn from a statistical distribution (like a normal distribution) based on your specified average return and volatility.
Instead of telling you if you will succeed, it tells you the probability of success. For example, a 90% success rate means that in 90 out of 100 simulated futures, your money lasted as long as you needed it to.
Why Use a Monte Carlo Calculator for Retirement?
Accounts for Volatility: Unlike simple calculators, Monte Carlo simulations incorporate the ups and downs of the market, providing a more realistic picture of potential outcomes.
Better Risk Assessment: It helps you understand the risk of running out of money, allowing you to adjust your savings, spending, or investment strategy accordingly.
Comprehensive Scenario Planning: It considers various factors like inflation, contributions, and withdrawals over a long period, offering a holistic view.
Peace of Mind: Knowing the probability of success can provide greater confidence in your retirement plan or highlight areas needing adjustment.
How to Use This Calculator
To get the most accurate results, carefully input the following:
Current Age: Your current age in years.
Desired Retirement Age: The age you plan to stop working and begin drawing from your retirement savings.
Planning Horizon (Years): The age you expect your money to last until. This is often your life expectancy, but you might choose a higher age for a more conservative plan.
Current Retirement Savings ($): The total amount you currently have saved for retirement.
Annual Contributions (Today's $): The amount you plan to save annually until retirement. This calculator assumes these contributions will increase with inflation each year.
Desired Annual Retirement Spending (Today's $): The amount you anticipate needing to spend annually in retirement, expressed in today's dollars. This calculator assumes this spending will also increase with inflation during retirement.
Average Annual Investment Return (%): Your best estimate for the average annual return your investments will generate over the long term. Be realistic and consider historical market data.
Investment Volatility (Standard Deviation, %): This measures how much your investment returns are likely to deviate from the average. Higher numbers indicate greater risk and wider swings in returns. Historical stock market volatility is often in the 15-20% range.
Expected Annual Inflation Rate (%): The rate at which you expect the cost of living to increase. This is crucial for maintaining your purchasing power in retirement.
Number of Simulations: The more simulations, the more accurate the probability. 1,000 to 5,000 is usually sufficient for a good estimate.
Interpreting the Results
The calculator will provide a "Probability of Retirement Success" as a percentage. A higher percentage means a greater likelihood that your savings will last throughout your planning horizon. Financial planners often aim for a success rate of 80% or higher. If your success rate is lower than desired, consider:
Increasing your annual contributions.
Delaying your retirement age.
Reducing your desired annual retirement spending.
Adjusting your investment strategy (though higher returns often come with higher volatility).
Limitations and Considerations
While powerful, Monte Carlo simulations have limitations:
Input Accuracy: The results are only as good as the inputs. Unrealistic assumptions about returns, volatility, or inflation will lead to inaccurate probabilities.
Normal Distribution Assumption: This calculator assumes investment returns follow a normal distribution, which is a simplification. Real-world market returns can have "fat tails" (more extreme events than a normal distribution predicts).
Fixed Strategy: It assumes a relatively fixed savings and spending strategy. In reality, you might adjust your plan based on market performance.
Taxes and Fees: This calculator does not explicitly account for taxes on withdrawals or investment management fees, which can significantly impact your net returns.
This calculator is a powerful tool for gaining insight into your retirement readiness, but it should be used as part of a broader financial planning process, ideally with the guidance of a qualified financial advisor.