Plan for 40-60 year retirements with safe withdrawal rates and Monte Carlo simulation
Simulations Run: 10,000 different market scenarios
Success Definition: Portfolio lasts until age
Method: Historical returns with random sequencing and volatility
Dynamic allocation strategy reduces equity exposure as you age, protecting against sequence of returns risk while maintaining growth potential in early retirement years.
• Monte Carlo uses historical S&P 500 returns (mean: 10%, std dev: 18%) and bond returns (mean: 5%, std dev: 8%)
• Portfolio rebalances annually to maintain target allocation
• Withdrawals increase annually with inflation
• Social Security benefits (if included) are inflation-adjusted
• Does not include taxes (use after-tax portfolio values and expenses)
• Success = portfolio balance > $0 at end of retirement
• For early retirees (40+ year horizons), consider 3-3.5% withdrawal rates vs traditional 4%