Monte Carlo Retirement Calculator: What Are the Odds Your Plan Succeeds?

Every retirement projection that shows a single line into the future is telling you an incomplete story. Markets are unpredictable. A Monte Carlo simulation runs a thousand possible futures — market booms, crashes, and everything in between — and tells you how often your portfolio survives each one. That probability is what actually matters.

Why a single projection isn't enough

If someone tells you "markets return 7% per year on average," a spreadsheet projection of your retirement portfolio looks fine. But averages obscure the thing that matters most in retirement: sequence of returns. Some 30-year periods start with a bear market (1966, 1973, 2000, 2022). Others start with a powerful bull run (1982, 1995, 2012). When you're withdrawing from the portfolio rather than adding to it, the early years are decisive — a bad sequence early can permanently deplete a portfolio that would have thrived under the same average returns in a different order.

Monte Carlo simulation replaces a single-line forecast with a distribution of outcomes. It samples from historical return statistics thousands of times, building a realistic spread of possible futures. The result isn't "your money will last 30 years" — it's "your plan survived 87 out of 100 simulated markets." That's actionable information.

Monte Carlo retirement simulation

Enter your portfolio value, annual spending, and retirement timeline. Withdrawal grows with inflation each year. Important: Enter only the spending that comes from your portfolio — subtract any guaranteed income (Social Security, pension, annuity) from your total spending first. If you spend $70,000/year and receive $28,000 in Social Security, enter $42,000 as your withdrawal.

What counts as a good success rate?

Most fee-only retirement planners target 85–90% success in Monte Carlo analysis — not 100%. Optimizing for 100% means drastically under-spending in the 80–90% of scenarios where markets are decent, leaving a large estate unnecessarily. The goal is confidence, not perfection.

The Morningstar 2025 annual retirement study updated the "safe" starting withdrawal rate to 3.9% for a 30-year horizon at 90% confidence — slightly below the classic 4% Bengen rule, reflecting lower forward-return expectations.¹ If your simulation shows 85%+ at your target withdrawal, your plan is well within the professionally accepted range.

Return assumptions used in this simulation

The calculator uses nominal return parameters derived from U.S. equity and bond data, 1926–2024 (Ibbotson SBBI / Vanguard research).² Your portfolio's blended mean and standard deviation are calculated from your stock allocation. Returns are drawn from a normal distribution each year.

A 60/40 portfolio produces a blended mean of approximately 7.6% with ~10.2% standard deviation. Withdrawals grow at your specified inflation rate each year, so the real withdrawal amount stays constant in purchasing power — consistent with a standard inflation-adjusted spending plan.

Important limitations of this model

• Taxes are excluded. If withdrawals come from a traditional IRA or 401(k), the gross amount you need is higher than what you keep. Enter pre-tax withdrawal needs, or use the retirement income tax calculator to gross up your spending target first.
• Spending changes over time. Research shows retirees naturally reduce discretionary spending in their mid-70s (the "retirement spending smile").³ If you plan to spend less later, your real success probability is higher than the simulation shows at fixed withdrawal.
• Normal distribution understates tail risk. Real markets have fatter tails than a normal distribution — crashes like 2008 or 1931 are more likely than the model implies. Results should be read as a planning range, not a precise forecast.
• Forward returns may be lower. Some researchers argue current valuations imply below-historical equity returns for the next decade. If concerned, run a sensitivity test: reduce stock mean by 1.5–2% and observe the success rate change.

Adjustments that improve success rate

If your simulation comes back below 80%, these levers, individually or combined, tend to have the largest impact:

• Delay Social Security claiming. Each year you wait past 62 increases your benefit by 6–8%. Claiming at 70 versus 62 raises your guaranteed income floor by 77%, permanently reducing portfolio dependence. See the Social Security claiming calculator.
• Reduce withdrawal by 10–15%. The success rate is highly sensitive to withdrawal in the 4–6% range. Dropping from 5% to 4.5% often moves success by 5–10 percentage points.
• Add an income floor. A SPIA or deferred income annuity covers essential spending so the portfolio only funds discretionary needs — structurally improving sequence-of-returns resilience.
• Implement a dynamic spending rule. Guyton-Klinger guardrails allow spending cuts of 10% after bad years and increases of 10% after good years. This flexibility lets you start at a higher withdrawal rate with comparable risk.

1. Morningstar. Annual State of Retirement Income research (2025 update). Updated safe withdrawal guidance: 3.9% for 30-year horizon, balanced portfolio.
2. Ibbotson, R.G. & Sinquefield, R.A. Stocks, Bonds, Bills and Inflation (SBBI) Yearbook. Updated annually by Morningstar. Long-run U.S. equity and bond return data, 1926–2024.
3. Blanchett, D. (2013). Exploring the Retirement Consumption Puzzle. Journal of Financial Planning. Documents the "retirement spending smile" — real spending declines in mid-retirement before rising again late in life.
4. Bengen, W.P. (1994). Determining Withdrawal Rates Using Historical Data. Journal of Financial Planning. Original 4% rule research using sequence-of-return analysis across historical U.S. market periods.