Steven Mays
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Retirement Monte Carlo Simulator

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See how often a withdrawal rate runs out of money. Change any input and 100,000 simulated retirements rerun.

4.0% ($40,000 a year)
30 years
60% stocks, 40% bonds

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Ran out of money, by withdrawal rate

Return assumptions (after inflation, % a year)

Each simulated year draws a random return near the average. The standard deviation sets the swing: about 2 years in 3 land within one standard deviation of the average.

2 years in 3: −10% to +26% 2 years in 3: −5.5% to +10.5%

At 0.1, stocks and bonds are nearly independent.The scale runs from −1 (opposite) to 1 (lockstep).

Your 60/40 mix averages 5.8% a year. 2 years in 3 land between −5.8% and +17.4%.

Assumptions

  • Returns are real (inflation-adjusted) and drawn from a normal distribution each year.
  • The averages are arithmetic means, and swings pull compound growth below them. Growth is about the average minus half the standard deviation squared. Stocks at an 8% average and an 18% standard deviation compound at about 6.4% a year.
  • The portfolio is rebalanced to your stock share every year.
  • You withdraw at the start of each year. The withdrawal is a fixed share of the starting balance, held constant after inflation.
  • No fees or taxes.
  • The default return figures are rounded assumptions. They aren't fitted to data, and model error can move the estimate in either direction.
  • Every setting uses the same 100,000 market histories, and sampling error is about ±0.2 percentage points.
  • Only spending as a share of the portfolio changes the failure rate. Doubling both dollar amounts gives the same result.
  • The withdrawal rate rounds to the nearest 0.05% and stops at 10%.
  • Real markets crash more often than a bell curve predicts; see Catastrophic Financial Risks.
  • This is an illustration. It isn't financial advice.

Why bother: Why Financial Independence?