Probability of Success clarification ...

[NickK]

In the webpages, it says "... even with a 90% probability of success, one out of 10 people would experience problems with their retirement finances."

Isn't it more accurate that given the same inputs, 100% of the subjects/people/investors will experience failure in 10% of the simulated market runs and success in 90% of the simulated runs. The 90% probability of success measures runs, not people.

If someone has different inputs, then it is a different and non-comparable analysis.

Put another way, if 13 identical people came in today with identical inputs (including 13 identical lives) and ran the tool, and if at the end of plan (about 35 years from now) the actual results were one of the 10% simulated runs that failed, then 100% of the 13 people would experience failure. Not 10% of those 13.

Another view: if you lived 10,000 lives and each life was modeled by one of the simulation runs (An incredible coincidence! ) then 9,000 would be successful and 1,000 would fail.

It may seem like a nit but it is important to note that success is measured by number of successful runs, not the number of people. The number of people is irrelevant. The only thing we can say is that I have a 90% chance of being on the success side of the analysis, and to the extent that the analysis matches reality, up to a 90% chance of actual success.

[jimr]

I think the problem was probably with my wording more than anything.

The idea I was trying to convey was that if 10 people each retired (say in random years), and each of them had made a plan with a 90% chance of success, the odds are that one of the ten would run out of money before they died.

The example was intended to convey what any 90% probability of success means in general lay terms, not in precise Monte Carlo retirement simulation terms.