Monte Carlo FIRE Retirement Survival Simulator

What a Monte Carlo simulation tells you

Every other retirement calculator gives you one number, produced by assuming the market returns the same amount every year. It never does. This simulator runs your plan a thousand times over, drawing a different sequence of market years each time, and reports not a number but a probability: the share of those thousand lives in which your money outlasted you.

How the thousand runs work

For each of the 1,000 runs and each year within it, the simulator draws a random return for stocks, bonds and cash, and a random rate of inflation, from distributions calibrated to long-run history: stocks average 8.2% a year with a standard deviation of 24%, bonds 3.5% with 6%, cash 1.5% with 1%, and inflation 3.5% with 2.5%. Your portfolio grows by the weighted result, your withdrawal is taken out, and the withdrawal is inflated for the following year.

The thousand results are then sorted, and three of them are shown: the 10th percentile, the median and the 90th. The median is the ordinary outcome. The 10th percentile is the one that matters — it is what happens when the draws go against you, and a plan that only works at the median is a plan that fails one time in two. A run in which the balance sits at zero for ten consecutive years is counted as ruined, not as recovered.

What it assumes

• Returns are drawn independently each year from a normal distribution. Real markets have fat tails — extreme years happen more often than a bell curve predicts — and they cluster, so a bad year is more likely to be followed by another.
• Asset classes are drawn independently of each other. In a real crisis correlations rise towards one, which is precisely when diversification is supposed to help.
• Your withdrawal rises with inflation regardless of what the portfolio did. Real retirees spend less after a bad year, which is the single most effective defense available and is not modeled here.
• No taxes, no fund fees, no state pension and no other income. Each of those shifts the result, and not all of them in the same direction.

Read the success rate as a comparison tool, not as a forecast. Ninety percent here does not mean a nine-in-ten chance in the world; it means this plan failed a tenth of the time under these assumptions, and you can see exactly which change makes that number move.

A worked example

A portfolio of 800,000, 70% in stocks, drawn down at 4% a year over thirty years, comes back with a success rate in the low nineties. The median run ends with more money than it started with — often several times more — which is the counter-intuitive part: the typical outcome of a sustainable withdrawal plan is dying rich.

Now raise the withdrawal rate to 5%. The median barely moves — but the success rate falls by more than twenty points and the 10th percentile run runs out of money in the mid-twenties. That gap is the entire argument for looking at the bottom decile: the typical outcome of the riskier plan looks fine, and the risk is all hiding in the tail you were not shown.

Common questions

Why a thousand runs and not more?

A thousand is enough for the success rate to be stable to about a percentage point, and few enough to finish instantly in your browser. Running ten thousand would move the second decimal place, not the decision.

Why does the result change each time I run it?

Because the draws are random. A success rate that swings by a point or two between runs is normal; one that swings by ten is telling you the plan is sitting on a knife edge, which is itself the answer.

What success rate should I aim for?

There is no correct threshold, and chasing 100% usually means working years longer for protection against scenarios in which you would have cut your spending anyway. What matters more is knowing which lever — spending, allocation, or one more year of saving — moves your number the most.