Methodology

Honest math for
retirement planning

Most retirement calculators assume markets return exactly 7% every year. That's not how markets work — and it leads to dangerously optimistic projections. Here's how we do it differently.

Why Monte Carlo simulation?

A fixed-rate calculator draws a straight line to your retirement. Monte Carlo draws thousands of possible futures — some great, some catastrophic — then tells you how often each kind happens.

50 simulated retirement paths

Same starting conditions, different market outcomes — this is the spread you're actually betting against.

📈Sequence of returns risk

Retiring into a bear market is very different from retiring into a bull market, even if average returns are identical. Monte Carlo captures this.

🎲Each run is independent

Every simulation samples from a realistic return distribution each year. Bad years cluster — just like in real markets.

📊Success rate = real odds

The percentage shown is literally the fraction of simulated futures where you don't run out of money before your planning age.

Log-normal returns, not normal

A naive model draws returns from a normal (bell curve) distribution — which allows a portfolio to go negative from a single year. Real asset prices follow a log-normal distribution: returns are multiplicative, so a portfolio can fall toward zero but never past it.

✗ Naive: Normal distribution

return = μ + σ·Z

· Portfolio value can go negative in a single year
· Symmetric: equally likely to be very good vs. very bad
· Underestimates crash severity, overestimates recovery speed

✓ Ours: Log-normal distribution

return = exp(μ_log + σ·Z) − 1

· Portfolio value is always ≥ 0
· Right-skewed: occasional large gains, bounded losses
· Better reflects how compounding actually works

Automatic glide path

Holding 80% stocks at age 60 is a very different risk profile than holding it at 40. The simulator gradually shifts your allocation from your current mix toward your retirement mix as you approach retirement — matching how target-date funds work.

Allocation over time (example: 80% → 60% stocks)

Stocks / Growth assets

Bonds / Stable assets

What we model

Retirement income is messier than a simple portfolio withdrawal. These are the real-world variables we account for in every simulation.

📉Stochastic inflation

Inflation is sampled independently each year from a normal distribution centered on your assumption. Your spending needs, Social Security, and healthcare all respond to their own inflation draws.

🏥Healthcare inflation

Medical costs historically outpace general inflation. Healthcare is tracked separately with its own higher inflation rate — defaulting to 6% — because ignoring it severely understates retirement costs.

🏛️Social Security COLA

Your SS benefit receives cost-of-living adjustments each year, sampled from the same inflation draw as the rest of the economy. Benefits are zero before your chosen start age.

📋IRS Required Minimum Distributions

At age 73, the IRS requires minimum withdrawals from traditional (non-Roth) accounts. We apply the Uniform Lifetime Table and force the RMD if it exceeds your planned withdrawal.

🔄Roth vs. traditional split

Roth withdrawals are tax-free. Traditional withdrawals are grossed up by your effective tax rate. The Roth fraction you set determines how your withdrawals are sourced and taxed.

🏠Home equity

Your home appreciates at a separate rate and your mortgage amortizes deterministically. Net equity is tracked at retirement and at end-of-plan, shown as part of total net worth.

📦Alternative assets

Crypto, gold, REITs, and other alternatives are modeled as a third asset class with independent log-normal returns and user-defined volatility — separate from your stock and bond allocations.

⚖️Contribution timing

We use the "midpoint method" — half your annual contribution is added before the annual return is applied, half after. This approximates monthly contributions without simulating 12 sub-steps per year.

🎯Three-way allocation

Stocks + alternatives + bonds sum to 100%. If you set 85% stocks and 15% Bitcoin, bonds get 0%. If the total would exceed 100%, the allocations are normalized proportionally.

Default assumptions

All values are editable. These defaults reflect broadly-used planning assumptions and can be changed to match your specific situation.

Parameter	Default	Rationale
Stock return	7.0%	Long-run US equity real return (Vanguard, Morningstar consensus)
Stock volatility	15%	Historical S&P 500 annual standard deviation (~15–17%)
Bond return	4.0%	Intermediate-term investment-grade bonds, current yield environment
Inflation	2.5%	Fed's 2% target plus modest buffer; SS COLA historically averages ~2.6%
Healthcare inflation	6.0%	KFF / CMS 50-year average medical CPI; roughly 2× general inflation
Tax rate	22%	Effective rate, not marginal; adjust to match your expected bracket
Planning horizon	Age 95	SSA tables show ~10% of 65-year-olds reach 95; planning shorter is optimistic

What we don't model

No simulator captures everything. Being honest about limitations helps you use the results correctly.

Tax optimization

The main simulator applies a flat effective tax rate. The Roth Conversion Optimizer models bracket-filling and RMD reduction, but tax-loss harvesting, state taxes, and full bracket management are not yet modeled.

Return correlations

Each asset class is sampled independently each year. In reality, stocks and bonds can become correlated during crises. Tail-risk scenarios may be slightly underestimated.

Variable spending

Many retirees naturally spend less in bad years. A fixed withdrawal assumption is more conservative than how people actually behave — which means our success rates may be understated.

Pension income

Defined-benefit pensions aren't modeled as a distinct input. Include any guaranteed pension income as part of your desired monthly income offset or as a Social Security equivalent.

Behavioral risk

Panic-selling in a crash, chasing returns, or deviating from your allocation are major failure modes the model can't account for. The simulation assumes you stay the course.

Future policy changes

Social Security solvency, tax law, healthcare policy, and RMD rules can all change. The model uses current rules as a baseline — plan for some uncertainty in these inputs.

Your data stays on your device

We built this with privacy as a default, not an afterthought.

🔒Stored locally only

Every number you enter — savings, age, income, portfolio — is saved in your browser's localStorage. It never leaves your device.

🚫No account required

We don't collect your email, create a profile, or ask you to sign up for anything. There's no server receiving your financial data.

🗑️Delete it anytime

Use the "Clear saved data" link in the footer to wipe everything instantly. Clearing your browser cache does the same.

The only external service this site uses is Google Analytics for anonymous page-view counts (no personal data, no financial data). You can block it with any ad blocker.

Everything in the toolkit

The retirement simulator is the core, with four more planning tools built into the same app — all free, no signup.

💼Portfolio Builder

Add your investment accounts, home, and debts to get a real net worth snapshot. Your Roth fraction, asset mix, and total savings flow automatically into the retirement simulator.

Build portfolio →

📊Retirement Simulator

Monte Carlo simulation across 500–5,000 futures. Models your full picture: stocks, bonds, crypto, Social Security, healthcare, RMDs, Roth/traditional split, and inflation.

Run simulation →

🏠Housing Calculator

Two tools in one: should you pay down your mortgage early or invest the extra money? And should you rent or buy in the first place? Both use Monte Carlo to compare outcomes.

Open Housing →

🏥Healthcare Estimator

Projects your ACA marketplace premiums year by year before 65, and Medicare IRMAA surcharges after. Shows exactly how your income level affects healthcare costs — including the ACA subsidy cliff.

Estimate costs →

🔄Roth Conversion Optimizer

Shows how much you can convert from a traditional IRA to Roth each year to fill low tax brackets, shrink future Required Minimum Distributions, and reduce estimated lifetime taxes.

Optimize conversions →

Learn the concepts

The numbers only mean something if you understand the ideas behind them. These guides use plain English and interactive visuals to explain the retirement concepts that drive your simulation results.

🎲

Monte Carlo

Why one projection line is a lie

📉

Sequence of Returns

Order matters more than average

🔄

Roth vs. Traditional

Pay taxes now or pay later?

📋

Required Minimum Distributions

The IRS will force you to withdraw