Model Limitations, by Portfolio Inventory
For financial planners reviewing a RetireRange plan. This page maps each kind of account, asset, and income source a household might hold to how the model treats it, the specific limitation to check, and which way the simplification leans — so you can go straight to the rows relevant to this portfolio.
RetireRange is a Monte Carlo simulator: thousands of randomized market/inflation paths, a household-level withdrawal strategy, and a tax engine (federal + all 50 states/DC). It is a model, not a prediction — every result is a projection from the assumptions entered. Read the Leans column as the fastest signal of where results may be too rosy or too cautious.
A. By account / tax type
| Holding | How the model treats it | Limitation to check | Leans |
|---|---|---|---|
| Traditional 401(k)/IRA | RMDs via Uniform Lifetime Table, onset 73/75 by birth cohort; withdrawals as ordinary income | RMD smoothing is always on (no lump-timing choice); heir tax is a flat ordinary+state rate — the SECURE-Act 10-year drawdown bracket math isn’t applied yet | Conservative on heir tax |
| Roth 401(k)/IRA | Withdrawals tax-free; passes to heirs at full value | 5-year and age-59½ rules not enforced — assumes qualified | Optimistic if funds aren’t seasoned |
| Taxable / brokerage | Withdrawals taxed as ordinary income; basis stepped up at death | No long-term cap-gains or qualified-dividend rates, no tax-loss harvesting; post-death gain drag not yet modeled | Overstates tax (conservative) |
| HSA | Medical-only (VEBA→HSA cascade); optional "stealth IRA" deferral | Inherited HSA taxed per the account’s Beneficiary: spouse rolls over tax-free; a non-spouse owes ordinary+state on the full balance in the year of death (no step-up; harsher than an inherited IRA’s 10-year spread). Modeled as a flat haircut — the year-of-death bracket spike isn’t captured. | Slightly optimistic for a non-spouse HSA (flat rate ignores the year-of-death lump) |
| VEBA | Medical-only, drawn before HSA; full value to heirs | Modeled as a distinct medical bucket, not a securities portfolio | Neutral |
B. By asset class
| Holding | Treatment | Limitation to check | Leans |
|---|---|---|---|
| Stocks / Bonds / Cash | Stochastic returns with a fixed correlation; the mix comes from how accounts are built | Static allocation — no glide path, no rebalancing; correlation held constant (assets can fall together in real crises); only four classes (no intl / small-cap / REIT / alternatives); normal mode understates fat tails | Both ways — cross-check with bootstrap / historical backtest |
C. By income source
| Holding | Treatment | Limitation to check | Leans |
|---|---|---|---|
| Social Security | Claiming-age optimizer; taxation thresholds modeled | SSA estimate assumes work-to-claim; survivor benefit uses the SSA age-graded factor (71.5% at 60 → 100% at FRA); no policy/solvency changes | Neutral (SSA estimate assumes continued work) |
| Pension | COLA + survivor % modeled | Start-date only (no end date or lump-sum option) | Neutral |
| Annuity | QLAC, exclusion ratio, COLA, survivor modeled | Models an existing stream; buying a new annuity mid-plan isn’t a modeled transaction | Neutral |
| Real estate | Appreciation + optional rental income + sale proceeds routed to an account | No mortgage amortization, HELOC, or reverse-mortgage modeling; primary residence counts only if entered | Neutral |
| Cash-value life insurance | Cash value + tax-deferred growth + death benefit to an account + optional tax-free policy-loan income | No lapse, MEC, surrender charges, or loan-interest accrual; not a general living-income source beyond the loan feature | Optimistic (ignores policy drag) |
D. Household-level
| Area | Treatment | Limitation to check | Leans |
|---|---|---|---|
| Mortality / survivor | None / Deterministic / Stochastic; survivor holds MFJ through the year of death, then flips to Single the following January | Stochastic deaths drawn from a unisex SSA period life table (no sex field yet); survivor SS via the SSA age factor (up to 100% at FRA); use Deterministic for clean strategy comparisons | Neutral |
| State tax | All 50 + DC; planned move supported; a move’s tax change flows to legacy under every target (V2) | Pension/military exemptions shown but not deducted; no county/local tax | Conservative (a few states run slightly high) |
| Medical / long-term care | Separate medical track + inflation, Medicare / IRMAA / Medigap / pre-Medicare bridge | Long-term care is not modeled at all | Optimistic — the biggest gap for many households |
| Fees | None deducted | No fund expense ratios, advisory fees, or trading costs — compensate by lowering return assumptions | Optimistic |
| Tax accounting | Realized federal + state tax drawn from the portfolio at each year-end, under every target (Engine V2) | Simplifications live in the rates (ordinary-income treatment of taxable withdrawals; no cap-gains / QDI / AMT / NIIT — see the rows above), not the payment mechanism | Conservative (rates overstate tax) |
Conservative by design
Most simplifications above are deliberately cautious — they tend to overstate tax and understate legacy (taxable-as-ordinary, non-spouse heir tax). The exceptions worth flagging to a client are the ones that lean optimistic: long-term care, investment fees, and cash-value life-insurance drag. Weigh a plan’s success rate with those three in mind.
See the user-facing Limitations page for the plain-language version.