The Flexible Retirement Planner uses Monte Carlo Simulation to help you build a state-of-the-art retirement simulation that models your retirement rather than simply calculating it. Using a simulator to model your plan allows you to explore a fuller range of possible outcomes. Long range financial planning is seldom clear cut enough for a yes or no answer to tell the whole story. That’s why this planner describes the results in terms of your plan’s “probability of success”.
To help you better capture the details of your plan, the planner supports a wide range of user inputs. In addition, it implements something called retirement spending “decision rules.” This is sometimes referred to as “dynamic retirement withdrawals” and attempts to account for a retiree’s ability to adjust their spending in response to the performance of their investment portfolio. Research suggests that implementing a dynamic or “flexible” spending approach may increase the amount that a retiree can safely withdraw from their portfolio each year. The flexibleRetirementPlanner lets you model this to get a better picture of how well your retirement plan might do in real life
Once you’ve successfully launched the planner and customized the inputs, click the “Run” button and watch the program run through your complete retirement life cycle 10,000 times. The simulation models both the accumulation and spending phases of your retirement plan. That means that the simulation will generate 10,000 unique sequences of randomly selected portfolio returns, which are coupled with the details of your plan including savings and spending, to track your hypothetical portfolio balance, savings, and spending through each year of your plan.
The results from each of the 10,000 simulated retirement “paths” are aggregated into yearly summary data and an overall probability of success (defined as not running out of money!). These results are displayed graphically and in tabular format so you can easily see how well your plan stacks up.