This documentation is written for subscribers and users of the Retirement Planner application. It is intended for people planning their retirement, not software developers. You do not need any technical background to use this tool or to read this guide.
Table of Contents
- What Is This Tool?
- Important Disclaimers
- Getting Started
- Your Household
- Your Accounts
- Withdrawal Strategy
- Spending Phases — Go-Go, Slow-Go, No-Go
- Roth Conversions
- Advanced Strategy Features
- Return and Inflation Assumptions
- Running a Simulation
- Understanding Your Results
- Health Insurance Bridge
- Social Security
- Required Minimum Distributions (RMDs)
- Taxes
- Surviving Spouse and Mortality Modeling
- Scenarios — Saving and Comparing Plans
- Strategy Comparison — Compare Tab
- The Optimizer
- Sensitivity Analysis — Tornado Chart
- What-If Quick Calculator
- Historical Backtest
- Reference Data
- Limitations and Known Constraints
- Glossary
1. What Is This Tool?
The Retirement Planner is a Monte Carlo simulation tool that helps you explore how your retirement savings might perform under thousands of different possible futures. Instead of telling you “you will have $X at age 85,” it shows you a range of likely outcomes — from pessimistic to optimistic — so you can make more informed decisions about when to retire, how much to withdraw, and how to structure your accounts.
What it is good for
- Comparing named scenarios side by side (“What if we retire two years earlier?” / “What if we claim Social Security at 62 vs. 70?”)
- Understanding how sensitive your plan is to market returns, inflation, and spending
- Identifying your biggest risks (sequence of returns, healthcare costs, longevity)
- Testing withdrawal strategies before committing to one
- Modeling real-life events — health insurance gaps before Medicare, surviving-spouse income changes, Roth conversions, and multi-phase retirement spending
What it is not
- A prediction of the future. No model can predict markets, inflation, or how long you will live.
- A substitute for a licensed financial planner. Use the results as a starting point for conversations with your advisor, not as final financial advice.
- A tax preparation tool. Tax estimates in this model are approximations based on current law and your inputs — they are not suitable for filing returns.
2. Important Disclaimers
Results are based on modeling and assumptions and are for educational and entertainment purposes only. Past performance does not guarantee future results. Consult a qualified financial planner for advice specific to your situation.
The projections you see are outputs of a mathematical model. They depend entirely on the assumptions you provide (return rates, inflation, spending, account balances, etc.). Small changes in assumptions can produce meaningfully different results. The model does not know about your specific tax situation, estate plan, health condition, or other personal circumstances that a financial advisor would consider.
3. Getting Started
First-time setup checklist
Before running your first simulation, you will want to gather:
- Birth dates for each person in the household
- Expected retirement dates (year is sufficient; exact date is optional)
- Social Security claiming ages you intend to use, and your benefit estimates from SSA.gov (at ages 62, FRA, and 70)
- Account balances as of today, for each account (401K, IRA, Roth, taxable, etc.)
- Ongoing contributions — how much you are contributing each month to each account, and whether you plan to stop at retirement
- Monthly spending estimate in retirement — what you expect to spend on non-medical living expenses
- Monthly healthcare estimate — what you expect to spend on health insurance and out-of-pocket medical costs
You do not need to have all of this perfectly nailed down. The tool is designed for exploration — enter your best guesses and refine over time.
4. Your Household
The Household tab is where you set up the people in your plan and basic plan settings.
People
For each person, you configure:
- Birth date — used to calculate age at every point in the simulation
- Retirement date — the month and year you plan to stop working
- Social Security claiming age — when you plan to start receiving Social Security benefits (between 62 and 70)
- Social Security benefit estimates — your estimated monthly SS benefit at age 62, at your Full Retirement Age (FRA), and at age 70, taken from your SSA statement (ssa.gov)
- Mortality mode — how the simulation handles the possibility of death (see Section 17)
- Pre-Medicare health insurance — coverage periods bridging retirement to Medicare (see Section 13)
- Medicare eligibility age — defaults to 65; can be changed if you qualify earlier through disability
- Medigap supplement premium — a monthly amount for Medicare Supplement insurance after Medicare begins
You can model a single person or a couple. For couples, each person has their own retirement date and SS claiming age, because these are often different.
Plan Settings
- Plan start date — typically today or the beginning of the current year
- Plan end age — the age at which the simulation ends (e.g., age 95 or 100). This is not a prediction of your lifespan — it is a planning horizon. Setting it higher is more conservative because the plan must fund a longer period.
- Filing status — Married Filing Jointly (for couples) or Single. This affects tax bracket calculations throughout the simulation.
- Number of simulations — how many random futures to model (default 5,000; higher gives more statistical precision but takes longer to run)
5. Your Accounts
The Accounts tab is where you enter all of your investment and savings accounts.
Account types
| Type | Description |
|---|---|
| Traditional 401K | Pre-tax employer plan; withdrawals are taxed as ordinary income; subject to RMDs |
| Roth 401K | After-tax employer plan; qualified withdrawals are tax-free; subject to RMDs (though RMDs can be rolled to a Roth IRA) |
| Traditional IRA | Pre-tax individual account; withdrawals are taxed; subject to RMDs |
| Roth IRA | After-tax individual account; qualified withdrawals are tax-free; no RMDs during owner’s lifetime |
| Taxable | Regular brokerage account; no special tax treatment; no RMDs |
| VEBA | Voluntary Employees’ Beneficiary Association account; used for medical expenses only |
| HSA | Health Savings Account; used for medical expenses only |
Medical accounts (VEBA and HSA)
VEBA and HSA accounts are treated differently from investment accounts:
- They are reserved exclusively for healthcare costs — they are never tapped for general living expenses
- When the simulation pays for medical expenses each month, it draws from VEBA first, then HSA, then (if both are empty) from the general investment pool
- They are marked with a heart symbol (♥) in the account list so they are easy to identify
Providers and accounts
Accounts are organized under providers (e.g., “Fidelity” or “Empower”). This is for organizational clarity — the provider name does not affect the simulation math.
Account ownership
Each account can be assigned to a specific person in the household. Ownership matters for RMD calculations (each person’s RMDs are calculated separately based on their age) and for the surviving-spouse event (accounts transfer to the survivor on death).
Contributions
For each account, you can configure a monthly contribution:
- Amount — how much per month (in today’s dollars)
- Start and end — relative to retirement (e.g., “until retirement”) or with a specific end date
- Inflation adjustment — whether the contribution grows with inflation over time (None, Full CPI, or 80% CPI)
Contributions stop automatically at the configured end date. The model will warn you if your entered contribution exceeds the IRS annual limit for that account type, including age-based catch-up contributions (age 50+ and age 55+ limits).
6. Withdrawal Strategy
The Strategy tab controls how money comes out of your accounts in retirement. This is one of the most important and most configurable parts of the tool.
How much to withdraw each month
You choose one of three withdrawal methods:
Classic (Fixed Withdrawal)
You set a withdrawal amount — either as a percentage of your portfolio at retirement (e.g., 4%), or as a fixed monthly dollar amount. That amount then adjusts only for inflation each year. Your income is predictable and stable, but it does not adjust if your portfolio grows or shrinks dramatically. This method corresponds to the well-known “4% rule.”
Dynamic
Each month, the simulation withdraws a fixed percentage of whatever your portfolio is worth at that moment. Your income rises and falls with the market. The portfolio technically never “runs out” under this method (there is always a percentage of something left), but your income can become very small in bad markets.
Guardrails
A hybrid approach. You start with a base withdrawal rate. If your portfolio shrinks enough that your current withdrawal exceeds an upper threshold (default 5% of portfolio), withdrawals are automatically reduced. If your portfolio grows enough that withdrawals fall below a lower threshold (default 3% of portfolio), withdrawals are automatically increased. This method smooths out income while protecting against depletion.
Setting your withdrawal target
You can set your target in several ways:
- Percentage of portfolio at retirement — withdraws a fixed fraction of what you had at the moment you retired, then adjusts for inflation each year (Classic method)
- Fixed monthly dollar amount — a specific dollar figure in today’s dollars; the model inflates it forward each year
- After-tax monthly dollar amount — you specify what you want to net after taxes; the model grosses up withdrawals to cover the estimated tax bill
Which accounts to withdraw from
You set an allocation across account types (Traditional, Roth, Taxable, etc.). Two modes are available:
Proportional mode — you assign percentage weights to each account type (they must sum to 100%). The simulation withdraws from accounts in that proportion each month. When an account type runs out, withdrawals cascade automatically to the next most similar type. For example, if your Roth 401K is depleted, the simulation shifts to your Roth IRA, then to Traditional accounts, and so on.
Ordered mode — you define a strict priority list: the simulation drains the first type completely before touching the second, and so on. This models strategies like “exhaust taxable first, then Traditional, then Roth.”
Medical expenses
Medical costs are handled separately from general living expenses:
- You set a monthly medical expense (in today’s dollars) that grows at the medical inflation rate
- The simulation pays this amount each month from VEBA first, then HSA, and then (if both are empty) from the general investment pool
- Medical expenses are in addition to your general living expenses — they do not reduce the amount you receive for non-medical spending
Net-of-medical mode: If you prefer to think of your total spending budget (medical + living combined), you can enable “Net-of-Medical” mode. In this mode, medical costs are subtracted from your withdrawal target rather than added on top. Total spending stays constant; only the split between medical and living changes.
7. Spending Phases — Go-Go, Slow-Go, No-Go
Real retirement spending does not stay constant. Most retirees spend more in the early active years (travel, recreation), less in the middle years as activity slows, and more again at the end when healthcare costs dominate.
The Spending Phases feature lets you model this pattern directly. Instead of a single flat spending level, you define a sequence of phases, each with:
- Name — a label for the phase (e.g., “Go-Go,” “Slow-Go,” “No-Go”)
- End age — the age (of the reference person) at which this phase ends
- Monthly amount — the spending target for this phase, in today’s dollars
- Medical inflation override — optionally, a different medical inflation rate for this phase (useful for the “No-Go” phase when healthcare costs tend to accelerate)
The default seed gives you three phases — active early retirement at 100% of your base spending, reduced mid-retirement at 85%, and healthcare-heavy late retirement at 70% general spending with 5% annual medical inflation.
Spending phases replace the single flat withdrawal target for the period they cover. The medical expense grows at its own rate independent of the general spending phases.
8. Roth Conversions
A Roth conversion means moving money from a Traditional (pre-tax) account to a Roth (after-tax) account. You pay ordinary income tax on the converted amount in the year of the conversion, but future growth and withdrawals from the Roth account are tax-free.
The Retirement Planner lets you model Roth conversions as part of your strategy. You can configure multiple conversion rules, each with:
- Year range — the calendar years during which conversions fire (e.g., 2025–2030)
- Annual amount — how much to convert per year (in today’s dollars)
- Inflation adjustment — whether the conversion amount grows with inflation over time
- Source account type — which account the money comes from (e.g., Traditional 401K or Traditional IRA)
- Destination account type — where it goes (typically Roth IRA)
The converted amount is added to your taxable income in the conversion year, which increases your tax bill in that year. The model captures this correctly. A common strategy is to fill the lower tax brackets in the early retirement years before RMDs begin, when your income may be lower than it will be once RMDs start.
Important limitation: The model does not enforce the Roth 5-year rule or the age 59½ requirement for penalty-free withdrawals. It treats all Roth withdrawals as tax-free regardless of account age.
9. Advanced Strategy Features
These features are available on the Strategy tab for more detailed scenario modeling.
Medicare premium modeling
Once either person reaches Medicare eligibility age (default 65), Medicare premiums are added to the monthly medical expense automatically:
- Part B base premium — the standard Medicare medical insurance premium
- Part D base premium — the prescription drug coverage premium
- Medigap supplement — the per-person monthly amount you configure on the Household tab for supplemental coverage
All three grow at the medical inflation rate. If your income in the prior year exceeded certain thresholds (IRMAA), Medicare charges a surcharge on top of these base premiums — the model calculates this automatically based on your projected income.
HSA “stealth IRA” strategy
Under IRS rules, you can pay medical expenses out-of-pocket today (while you are young and healthy) and reimburse yourself from your HSA years or decades later — there is no time limit on reimbursements, as long as the expense occurred after you opened the HSA. This means an HSA can function as a tax-free investment account if you are disciplined about not touching it.
The “HSA Stealth IRA” mode models this strategy:
- Before your reimbursement start age (typically 65, your Medicare age): medical expenses are paid from VEBA only; the HSA is untouched and grows tax-free
- After your reimbursement start age: the HSA re-enters the medical cascade and can be drawn for healthcare costs
This is a powerful tax optimization for those who can afford to pay medical costs out-of-pocket during working years.
Downturn-aware withdrawals
In a market downturn, selling investments at depressed prices to fund living expenses accelerates the portfolio’s decline (this is called “sequence of returns risk”). The downturn-aware feature addresses this:
- You set a threshold — for example, if your stock portfolio has fallen 10% or more over the past 12 months, the simulation is in “downturn mode”
- When in downturn mode, the simulation shifts its withdrawal order to drain Cash first, then Bonds before touching Stocks
- This preserves your equity holdings at depressed prices, giving them time to recover
Cash reserve target
A cash reserve is a buffer of liquid money held in cash or money market accounts. This feature lets you tell the simulation to maintain a minimum floor:
- Months of expenses — how many months of living expenses to keep in cash (e.g., 24 months)
- The simulation will not draw cash accounts below this floor during normal operations
Recovery refill (optional): When markets recover, you can configure the simulation to automatically refill your cash reserve from gains:
- Set a refill threshold — if your stock portfolio has gained 10% over the past 12 months, the simulation routes withdrawals from equity into the cash reserve until it is restored
Lump-sum withdrawal events
Use this feature to model one-time large expenses — a home renovation, a major vacation, or helping a child with a down payment:
- Label — a description of the expense
- Calendar year — the year the withdrawal occurs
- Amount — how much (in today’s dollars)
- Inflation adjustment — whether the amount grows with CPI to the event date
Lump-sum events draw from your accounts in January of the specified year, using your standard allocation percentages.
RMD smoothing
By default, when Required Minimum Distributions exceed the amount the simulation would otherwise withdraw, the shortfall is drawn as a lump sum in December. If you prefer to model this as an evenly-spread monthly amount throughout the year, enable RMD smoothing. Both approaches produce the same total annual RMD; only the monthly cash flow timing differs.
10. Return and Inflation Assumptions
The Assumptions tab is where you configure the expected behavior of your investments and inflation.
What these numbers mean
Each asset class has two inputs:
- Expected annual return — the average annual return you assume this asset class will earn over time
- Annual volatility — how much returns vary from year to year (higher volatility = wider range of outcomes)
The defaults are based on long-term historical averages. You should feel free to lower these if you want to model a more conservative future (e.g., if you believe bond yields will remain low, or if you want to stress-test against below-average stock returns).
Default assumptions
| Asset Class | Annual Return | Volatility |
|---|---|---|
| Stocks | 7.5% | 18.0% |
| Bonds | 4.5% | 6.0% |
| Cash / Money Market | 3.0% | 1.0% |
| VEBA | 5.33% | 8.29% |
| Inflation | 2.7% | 1.2% |
CAGR vs. arithmetic mean
You can set how your return inputs are interpreted:
- CAGR (Compound Annual Growth Rate) — the geometric average; accounts for the fact that a 50% gain followed by a 50% loss does not break even. Most financial planning uses this.
- Arithmetic Mean — the simple average; higher than CAGR for volatile assets. Using arithmetic mean with high volatility will produce more optimistic projections.
When in doubt, leave this set to CAGR.
Stock-bond correlation
By default, stocks and bonds are assumed to have a slight negative correlation (−0.20), meaning when stocks do poorly, bonds tend to do better. This reflects historical behavior and is one reason holding some bonds in a portfolio reduces overall risk. You can adjust this if you believe the relationship will be different in the future.
Medical inflation
You can model healthcare costs with a separate, higher inflation rate than general CPI. This reflects the historical reality that medical costs tend to rise faster than the overall price level. When set, medical expenses (premiums, out-of-pocket costs) grow at this rate instead of general inflation.
SS COLA
By default, Social Security benefits grow with the same general inflation process as everything else. If you want to model a scenario where SS cost-of-living adjustments differ from general CPI (higher or lower), you can configure a separate SS COLA process on the Assumptions tab.
Heir tax rate
When calculating after-tax legacy — the amount your heirs would actually receive after paying income tax on inherited Traditional (pre-tax) accounts — the model applies this rate. Default is 30%. Adjust it to match your best estimate of your heirs’ marginal tax bracket.
Bootstrap mode (advanced)
The standard simulation generates random returns using a mathematical model (normal distributions). An alternative block bootstrap mode instead draws directly from the actual historical record of U.S. market returns (1928–2025):
- The simulation randomly picks blocks of consecutive historical years and chains them together to create a simulated future
- This preserves real-world patterns like momentum and volatility clustering that the normal distribution does not fully capture
- Default block length is 5 years; shorter blocks give more randomness, longer blocks preserve more real-world structure
Bootstrap mode is most useful when you want results grounded purely in observed history rather than a mathematical model.
11. Running a Simulation
Once your household, accounts, and strategy are configured, click Run Simulation on the Results tab.
The simulation runs thousands of independent random scenarios (default: 5,000). Each scenario generates a different sequence of returns, inflation, and other random factors. The results you see are the statistical summary of all those scenarios.
Simulations typically complete in a few seconds. Increasing the simulation count to 10,000 provides more precision but takes a bit longer.
12. Understanding Your Results
The Results tab shows you the statistical distribution of outcomes across all simulations.
Key headline metrics
Success Rate
The percentage of simulations in which your portfolio lasted until the end of your plan horizon without running out of money. A 90% success rate means that in 90 out of 100 simulated futures, you still had money at your plan end date. Higher is not always better — a 99% success rate may mean you are spending too little and leaving a large unspent legacy unnecessarily.
Shortfall Rate
The percentage of simulations in which there was at least one month where the simulation could not fully fund your withdrawal target (even after drawing from all accounts). A low shortfall rate is more important than a high success rate for many retirees.
Median Ending Balance
The portfolio balance at your plan end date in the middle (50th percentile) simulation. Half of simulations ended with more; half ended with less. This is a proxy for the legacy (bequest) value of your plan.
After-Tax Legacy
The median ending balance adjusted for the income tax your heirs would owe on inherited Traditional (pre-tax) accounts. Traditional 401K and IRA balances are reduced by your configured heir tax rate (default 30%). Roth and Taxable accounts are taken at face value.
Lifetime Social Security Receipts
The total Social Security income received across the plan horizon (in nominal dollars), shown at the 10th, 50th, and 90th percentiles. This is sensitive to mortality modeling — simulations where one person dies early naturally receive less lifetime SS.
Median Monthly Income
The median monthly withdrawal amount across the plan period. This is what you can expect to receive in a typical simulated future for living expenses.
Portfolio trajectory chart
This chart shows how your total portfolio value evolves over time across the range of simulations. The shaded bands represent:
- Dark band (25th–75th percentile) — the middle half of all simulations
- Light band (10th–90th percentile) — the broader range, excluding extreme outliers
- Center line (median, 50th percentile) — the typical outcome
A wider band means higher uncertainty (more sensitive to market returns). A line that trends toward zero in many simulations is a warning sign. You can toggle between nominal values (what the dollar numbers will actually say) and real values (adjusted to today’s purchasing power).
Bad-sequence overlay
The bad-sequence overlay is a button below the portfolio trajectory chart. When you turn it on, five additional dotted lines appear on top of the Monte Carlo bands — each showing what your specific plan would have looked like if retirement had started in one of the worst historical market environments on record:
| Sequence | Starting year | Historical context |
|---|---|---|
| 1929 | Great Depression onset | 90% stock decline over three years |
| 1966 | Stagflation onset | A decade of below-inflation equity returns combined with rising prices |
| 1973 | OPEC crisis / stagflation | Oil shock, double-digit inflation, severe equity bear market |
| 2000 | Dot-com crash | Lost decade for U.S. equities; two crashes in ten years |
| 2008 | Financial crisis | 50% stock decline; the worst single-year loss since 1931 |
These are deterministic projections — there is no randomness involved. Each line shows exactly where your portfolio would have tracked if the plan had started in that year, given your current account balances, contributions, withdrawals, and asset mix. The same historical return data used in the Historical Backtest tab powers these overlays.
How to use the overlay
Turn it on after running a simulation. Click the “Bad-sequence overlay” button on the Results tab — it highlights when active. The five dotted lines appear on the trajectory chart alongside the Monte Carlo bands.
Read it alongside the percentile bands. The lower percentile bands (P10, P25) from your Monte Carlo simulation represent bad outcomes in general. The overlay lines show specific real-world bad outcomes. If the overlay lines fall inside your P10 band, it means your Monte Carlo simulation already captures scenarios roughly as bad as those historical periods. If the overlay lines fall below your P10 band, the historical episodes were worse than 90% of your simulated outcomes — a warning that your simulation’s assumptions may be more optimistic than history supports.
Assess your sequence-of-returns vulnerability. Portfolios with heavy stock allocations and high withdrawal rates are most vulnerable to a bad sequence early in retirement. An overlay line that drops steeply in the first five years and never recovers is a sign that sequence-of-returns risk is a meaningful threat to your specific plan. Possible responses include lowering your withdrawal target, increasing your cash reserve, or enabling the downturn-aware withdrawal feature (see Section 9).
Do not over-interpret individual lines. The overlay shows what would have happened with that exact historical sequence — it is not a prediction. The Great Depression or 1970s stagflation may or may not be representative of the risks ahead. Use the overlay to stress-test your assumptions and gut-check the Monte Carlo bands, not to assign a specific probability to any single scenario.
Monthly income chart
Shows the monthly income you receive from the portfolio over time, broken down into:
- General living expense withdrawals
- Medical/healthcare withdrawals (separate, from VEBA/HSA/general pool)
- Social Security income
Tax summary chart
Shows the estimated federal and Connecticut income tax by year, at multiple percentiles. Useful for understanding your tax burden over time and when RMDs or other events push you into higher brackets.
RMD projection chart
Shows the Required Minimum Distribution amount by year, at multiple percentiles. Useful for understanding when and how much you will be forced to withdraw from Traditional accounts, and whether those forced distributions exceed or fall short of your spending needs.
Ruin probability chart
Shows the cumulative percentage of simulations that have run out of money by each month of the plan. A flat line near 0% is ideal. A steeply rising line means many simulations deplete early.
Ending balance distribution
A histogram showing the distribution of final portfolio values at your plan end date. A distribution skewed toward zero means many simulations resulted in near-depletion. A distribution with a long right tail means many simulations resulted in a large legacy.
Account balance breakdown (stacked chart)
Shows the balance of each account over time, stacked to show the total portfolio. Useful for understanding how and when different accounts are depleted, and which account types dominate at each point in the plan.
13. Health Insurance Bridge
For most people who retire before age 65, there is a gap period before Medicare eligibility. During this time, you need to arrange your own health insurance coverage, which can be expensive.
The Retirement Planner models this health insurance bridge as a series of coverage periods, each with its own monthly premium and growth rate. A typical bridge might look like:
| Period | Coverage | Duration | Monthly Premium |
|---|---|---|---|
| 1 | COBRA | 18 months | $1,500 |
| 2 | ACA Marketplace | Until Medicare | $900 |
Each person has their own bridge configuration, starting from their individual retirement date and ending at their configured Medicare eligibility age (default 65).
Key things to know
- Bridge premiums are in today’s dollars and grow at your configured medical inflation rate (or a fixed rate you set per period)
- The bridge ends automatically when the person reaches Medicare age — you do not need to set an end date for the final period
- After Medicare age, the separate Medigap / Medicare supplement premium applies
- If you retire after 65 or are already on Medicare, you can leave the bridge empty
- The Medicare eligibility age field is per-person and affects both the bridge end date and when Medicare premiums begin
14. Social Security
How benefits are entered
You enter your Social Security benefit estimates directly from your SSA statement (available at ssa.gov). You provide three estimates per person:
- Benefit if you claim at age 62 (early, reduced)
- Benefit if you claim at your Full Retirement Age (FRA) — typically 66 or 67 depending on birth year
- Benefit if you claim at age 70 (maximum, delayed)
The model interpolates between these for any claiming age you choose.
Full Retirement Age
Your FRA depends on your birth year. For people born in 1960 or later, FRA is 67. For earlier birth years, it is between 65 and 67. The model looks this up automatically based on your birth date.
Claiming age and benefit size
Claiming Social Security early (before FRA) permanently reduces your monthly benefit. Claiming late (after FRA, up to age 70) permanently increases it. The increases stop at age 70 — there is no additional benefit from waiting past 70.
| Claiming Age | Effect on Benefit |
|---|---|
| Age 62 | Reduced by 25–30% below FRA amount |
| FRA (66–67) | Full FRA benefit; no reduction or increase |
| Age 70 | Increased approximately 24–32% above FRA amount (8% per year after FRA) |
This is one of the most consequential decisions in retirement planning, and it interacts with longevity: claiming late pays off if you live long, claiming early pays off if you live a shorter life. The Optimizer can search over SS claiming ages to find the combination that best matches your goals.
Spousal benefits
For married couples, each spouse can receive either their own earned benefit or a spousal benefit equal to 50% of the other spouse’s FRA benefit — whichever is larger. The model applies this comparison automatically; you do not need to configure it manually.
The spousal benefit is reduced if the claiming spouse claims before their own FRA.
Survivor benefits
When one spouse dies, the surviving spouse is entitled to the deceased’s Social Security benefit (if it was larger than their own). The model handles this automatically when you use the surviving spouse feature:
- The survivor receives the higher of their own benefit or approximately 75% of the deceased’s benefit (a conservative approximation; the actual SSA rule may pay up to 100% in some cases)
- The deceased person’s SS payments stop
- The survivor’s income from SS adjusts at the death event
Social Security and income taxes
Up to 85% of your Social Security benefit may be subject to federal income tax, depending on your total income. The model implements the IRS formula (Pub 915) for this:
- If your total income including half of SS is below $32,000 (for married couples): no SS is taxable
- Between 32,000and32,000 and 32,000and44,000 (MFJ): up to 50% of SS is taxable
- Above $44,000 (MFJ): up to 85% of SS is taxable
Lower thresholds apply for single filers. The model calculates this each year based on your projected income. At high retirement incomes, assume that 85% of your SS will be taxed.
Important caveats
- Your SSA statement assumes you keep working until your claim age. If you retire early, your actual benefit may be lower than the statement shows (because your lifetime earnings record will not include those additional working years).
- The model does not simulate potential future changes in SS policy or benefit cuts. It projects your stated benefit forward with inflation (or your configured SS COLA rate).
15. Required Minimum Distributions (RMDs)
What is an RMD?
The IRS requires that owners of Traditional 401K and Traditional IRA accounts begin withdrawing a minimum amount each year once they reach a certain age. These are called Required Minimum Distributions. The purpose is to ensure that pre-tax savings eventually get taxed.
If you fail to take your full RMD in any year, the IRS imposes a 25% excise tax on the amount you should have withdrawn but did not.
When do RMDs start?
Under current law (SECURE Act 2.0), RMDs begin at age 73 for most people. This age is configurable in the Reference Data tab in case the law changes in the future.
Which accounts are subject to RMDs?
- Traditional 401K — yes
- Traditional IRA — yes
- Roth 401K — yes (though this can be avoided by rolling the balance into a Roth IRA before RMD age)
- Roth IRA — no, during the owner’s lifetime
- Taxable, VEBA, HSA — no
How is the RMD calculated?
Each year, the model calculates your RMD for each applicable account as:
RMD = Account balance at end of prior year ÷ Distribution period from the Uniform Lifetime Table
The Uniform Lifetime Table is published by the IRS and gives a different distribution period for each age. For example, a 75-year-old uses a distribution period of 24.6 years, so the RMD is about 4.1% of the prior-year balance. The distribution period decreases each year, requiring you to draw down a higher and higher fraction of your account.
Each person’s RMDs are calculated separately based on their individual age and account ownership.
How RMDs interact with your withdrawal strategy
If your planned monthly withdrawals already exceed the annual RMD requirement, the RMD is automatically satisfied — no forced extra withdrawals occur.
If your planned withdrawals fall below the annual RMD requirement, the simulation forces additional withdrawals to cover the shortfall. By default these are taken in December as a lump sum; you can enable RMD smoothing on the Strategy tab to spread them evenly across all months instead. These forced distributions are added to your taxable income, which can push you into higher tax brackets and trigger higher IRMAA Medicare surcharges.
RMDs cannot be satisfied by making Roth conversions — conversions are separate transactions.
Excess RMD deposits
If forced RMD distributions exceed what you need for living expenses, the excess is deposited into your Taxable account (under the same owner) rather than disappearing. This models the realistic situation where retirees receive more than they spend and reinvest the excess in a taxable brokerage account.
16. Taxes
The Retirement Planner estimates income taxes as part of each simulation run. This helps you understand your likely after-tax income and plan strategies around minimizing taxes.
Federal income tax
Federal taxes are calculated using the current IRS progressive bracket structure, applied each year. The model:
- Starts with your gross income from all sources (withdrawals, SS income, Roth conversions)
- Subtracts the standard deduction (which inflates with CPI each year)
- Applies the marginal rate brackets to the remaining taxable income
- Adds SS taxability per the IRS Pub 915 three-tier formula (see Section 14)
Both Married Filing Jointly (MFJ) and Single filing status are supported. Filing status switches from MFJ to Single at the death of a spouse if you use the surviving spouse feature.
Connecticut state income tax
In addition to federal tax, the model estimates Connecticut state income tax:
- CT uses its own bracket structure with a personal exemption
- The exemption phases out for higher incomes (reduced 1forevery1 of income above 24,500forMFJ/12,500 for Single)
- CT brackets are inflated forward with CPI, consistent with the federal treatment
If you live in a different state, the CT tax estimate does not apply to your situation. Multi-state support is planned for a future release.
IRMAA — Medicare income surcharges
IRMAA stands for Income-Related Monthly Adjustment Amount. It is a Medicare surcharge applied to your Part B and Part D premiums when your income in the prior year exceeds certain thresholds. The surcharge is assessed per person (both spouses pay it if both are on Medicare and both have high income).
The model calculates IRMAA automatically:
- Once either person reaches Medicare age, IRMAA applies based on projected prior-year MAGI
- Higher income pushes you through five surcharge tiers — from a small additional amount to several times the base premium
- This is one reason Roth conversions or other taxable events in the year before you turn 65 require careful planning
IRMAA thresholds are projected forward with CPI inflation.
What the model does not tax
The following items are treated favorably by the model relative to what the IRS might actually assess:
- Capital gains in taxable accounts — the model treats all taxable account withdrawals as ordinary income. In reality, long-term capital gains are often taxed at lower rates (0%, 15%, or 20%). This is a conservative assumption that may overstate your tax bill.
- Roth withdrawals — treated as fully tax-free regardless of account age. The 5-year rule and age 59½ requirement are not enforced.
- Alternative Minimum Tax (AMT) — not modeled.
- Estate taxes — not modeled; the after-tax legacy metric uses income tax rates only for inherited Traditional account distributions.
Using the tax estimates
The tax figures in the Results tab are projections, not filing advice. Use them to:
- Understand roughly how much of your gross withdrawals will be absorbed by taxes
- Compare strategies that differ in their pre-tax vs. after-tax account mix
- Identify years with spikes (large RMDs, Roth conversions, lump-sum events) that push you into higher brackets
17. Surviving Spouse and Mortality Modeling
Retirement planning for couples requires confronting the possibility that one spouse will outlive the other. When a spouse dies, income, taxes, and expenses all change: Social Security is reconfigured, the surviving spouse files at Single rates (narrower brackets), and account ownership transfers.
Mortality modes
Each person can have one of three mortality settings:
None (default)
No death event ever fires. The couple lives together through the entire plan horizon. This is the simplest assumption and is used when you want to focus on investment and withdrawal strategy without factoring in mortality.
Deterministic
Death fires exactly when the person reaches the age you configure (e.g., “David dies at age 82”). This fires in every simulation — it is not random. Use this mode when you want to model a specific scenario consistently (e.g., “What happens to Nancy if David dies at age 80?”).
Stochastic
The simulation independently samples a death age for each simulated future using the SSA 2021 Period Life Table (which gives age-specific mortality probabilities for men and women). In some simulations the person lives to 95; in others they die at 73. This captures the genuine uncertainty around longevity and is the most statistically rigorous approach.
What happens at the death event
When a person dies in a simulation:
- Filing status switches from Married Filing Jointly to Single, narrowing the federal and CT tax brackets from that point forward
- Account ownership transfers to the surviving spouse (Traditional accounts roll over; Roth accounts transfer tax-free)
- RMDs are recalculated using the survivor’s age and the inherited balances
- Social Security is reconfigured: the survivor receives the higher of their own benefit or the survivor benefit derived from the deceased’s PIA (approximately 75% of the deceased’s benefit in this model)
- The simulation continues as a single-person household until the plan end age
Caution with stochastic mortality and comparisons
When using stochastic mortality, different simulations within a single run will have different death ages for the same person. This is intentional — it captures longevity risk. However, if you use the Compare tab to compare two strategies, each strategy will have different death ages across simulations even though they use the same shared random seed for market returns. This means some differences in outcomes between strategies may partly reflect different death ages rather than different financial results. For clean strategy comparisons, use Deterministic mortality so both strategies model the same death event.
18. Scenarios — Saving and Comparing Plans
A scenario is a complete snapshot of your inputs (household settings, accounts, strategy, assumptions) and the results of running the simulation with those inputs. Saving scenarios is one of the most powerful features of this tool.
Why use scenarios?
Scenarios let you answer “what if” questions:
- What if we retire two years earlier?
- What if we claim Social Security at 62 instead of 70?
- What if we reduce spending by $500/month?
- What if stock returns average 6% instead of 7.5%?
For each question, save a separate scenario with the changed input, run the simulation, and compare it against your baseline.
Saving a scenario
Use the Save Scenario button (top of the page) to save your current inputs and results under a name you choose. The name should describe the key difference from your baseline (e.g., “Retire 2024 — SS at 62” or “Conservative Returns — 6% stocks”).
Comparing scenarios
Load any saved scenario and use the Compare button to overlay its median trajectory on top of your current simulation chart. The comparison also shows side-by-side statistics (success rate, median income, ending balance) so you can directly evaluate the tradeoff.
What is saved
Each scenario saves everything: all household inputs, all account balances and contributions, your full strategy configuration, return and inflation assumptions, and the simulation results. Changing inputs in the current session does not affect your saved scenarios — they are independent snapshots.
19. Strategy Comparison — Compare Tab
The Compare tab is designed for side-by-side strategy comparisons using the same random market sequences, making differences in outcomes attributable to the strategy choice rather than luck.
What Compare does differently
When you run a normal simulation, each run generates its own random sequences of returns and inflation. If you run two simulations separately and compare them, any differences might be partly due to different random sequences rather than the strategy itself.
The Compare tab solves this by running all selected strategies against the same set of random market sequences (shared seeds). Strategy A and Strategy B face exactly the same simulated markets. Any difference in outcomes is entirely due to the strategy — not the random draw.
How to use it
- Save multiple named strategies using the Save as Strategy button from the Optimizer or Strategy tab
- Navigate to the Compare tab and select 2–5 strategies to compare
- Run the comparison — all strategies are evaluated simultaneously against the same market sequences
- Review the multi-line trajectory chart, multi-line income chart, and the side-by-side statistics table
Breakeven analysis
The Compare tab also shows a breakeven calendar year — the year at which one strategy overtakes another in median ending balance. This is useful for strategies where one option front-loads spending (lower legacy at first) but leads to better long-term outcomes.
What you see in the results
- Multi-strategy trajectory chart — median portfolio value over time for each strategy, overlaid on one chart
- Multi-strategy income chart — median monthly income over time for each strategy
- Statistics table — side-by-side: success rate, shortfall rate, median legacy, P10 legacy, after-tax legacy, lifetime SS receipts, lifetime taxes paid
20. The Optimizer
The Optimizer is a tool for systematically searching for the best retirement strategy. Instead of manually trying different allocation percentages or SS claiming ages one at a time, the Optimizer evaluates hundreds or thousands of combinations automatically and ranks them by your chosen objective.
What the Optimizer can vary
You choose which dimensions of your strategy to search:
| Dimension | What it varies |
|---|---|
| Allocation percentages | How much to withdraw from each account type (Traditional, Roth, Taxable) |
| Withdrawal target | What percentage of portfolio or monthly dollar amount to target |
| Withdrawal method | Classic, Dynamic, or Guardrails |
| Guardrail bounds | Upper and lower guardrail thresholds |
| Social Security claim ages | When each person claims SS (ages 62–70) |
| Roth conversion amount | How much per year to convert from Traditional to Roth |
| Downturn threshold | At what stock loss level to switch to the conservative withdrawal order |
| Cash reserve | How many months of expenses to keep in cash |
Search methods
Grid search — evaluates every possible combination of the values you specify (e.g., “try SS at 62, 64, 66, 68, 70 for each person” → 25 combinations). Thorough but can grow very large.
Latin Hypercube Sampling (LHS) — a more efficient approach that ensures broad coverage of the search space with fewer evaluations. Good when the search space is large.
Random — randomly samples combinations. Less systematic than LHS but easy to budget.
You can set a budget cap to limit the number of candidates evaluated, regardless of the total search space size.
Objectives — what to optimize for
You can optimize for a single objective or a weighted combination of multiple objectives:
| Objective | What it maximizes or minimizes |
|---|---|
| Success Rate | Percentage of simulations where the portfolio survives (maximize) |
| Shortfall Rate | Fraction of simulations with unmet withdrawals (minimize) |
| Median Legacy (P50) | Portfolio balance remaining at plan end in the typical case (maximize) |
| Worst-Case Legacy (P10) | Portfolio balance in the worst 10% of simulations (maximize) |
| After-Tax Legacy | Median legacy adjusted for heir income tax on Traditional accounts (maximize) |
| Lifetime SS Receipts | Total Social Security income over the plan horizon (maximize) |
| Lifetime Taxes Paid | Total federal + CT taxes paid over the plan horizon (minimize) |
| Income Stability | Minimize how much your monthly income varies year-to-year |
Composite objectives: You can assign weights to multiple objectives (e.g., 60% weight on Success Rate, 40% weight on Median Legacy) and optimize the combined weighted score.
Constraints: You can require that candidates meet a minimum threshold on any metric (e.g., “only consider strategies with success rate ≥ 90%”) and exclude those that do not qualify.
Understanding optimizer results
Results are displayed as a chart (for single-dimension sweeps) or a scatter plot (for multi-dimensional searches). Each point represents one evaluated strategy candidate. The tool ranks all candidates best-first and lets you inspect any candidate’s full settings.
Save as Strategy: Once you find a promising candidate, you can save it as a named strategy for use in the Compare tab.
Important limitation: result precision
The Optimizer evaluates candidates in batches to keep memory usage manageable. Candidates within the same batch are compared against the same set of random market sequences (shared seeds), so differences are directly attributable to the strategy. However, candidates in different batches are evaluated against different random sequences. A difference of less than 1–2 percentage points in success rate between candidates from different batches may reflect random variation rather than a genuine strategy difference. For very close calls, use the Compare tab to re-evaluate the finalists against each other with fully shared seeds.
21. Sensitivity Analysis — Tornado Chart
The Sensitivity Analysis (Tornado Chart) shows you how much each key assumption affects your results. It answers the question: “Which of my inputs has the biggest impact on my retirement outcome?”
How it works
The analysis runs 9 simulations:
- Your current baseline (unchanged)
- Stock returns increased by 1 percentage point
- Stock returns decreased by 1 percentage point
- Bond returns increased by 1 percentage point
- Bond returns decreased by 1 percentage point
- Inflation increased by 1 percentage point
- Inflation decreased by 1 percentage point
- Withdrawal target increased by 10%
- Withdrawal target decreased by 10%
Each run produces results for all metrics (success rate, median legacy, etc.). The tornado chart displays the range of each metric across all perturbations — a wider bar means that assumption has a larger impact on that metric.
How to read it
A long bar for “Stock Returns ±1%” tells you that your plan is highly sensitive to stock market performance. A short bar for “Bond Returns ±1%” tells you bond returns are a minor factor for your specific plan. The bar extends in both directions from the baseline: the right side shows the favorable perturbation, the left side shows the unfavorable one.
Practical use
Use sensitivity analysis to:
- Focus attention on your most important assumptions
- Decide whether to stress-test a specific assumption more carefully
- Understand whether your plan’s success depends primarily on market returns, inflation, or spending control
Note: Tail metrics like Success Rate and Shortfall Rate at the extremes (P10, P90) are noisier than the median. A 1–2 percentage-point swing in these metrics may reflect Monte Carlo sampling variation rather than the true effect of the perturbation.
22. What-If Quick Calculator
The What-If Quick Calculator is a fast, interactive tool for exploring questions without running a full Monte Carlo simulation. Unlike the main simulator, the What-If Calculator uses a single deterministic path (no randomness), so results are immediate.
What you can adjust
Sliders let you tweak:
- Stock return ±1 percentage point from your assumption
- Bond return ±1 percentage point
- Inflation ±1 percentage point
- Withdrawal target ±10%
- Retirement year (earlier or later)
- Starting account balances
- Monthly contributions
How to interpret the results
Because there is no randomness, the What-If Calculator produces a single trajectory, not a range. It is directional guidance only:
- “If stocks return 1% less than expected, my ending balance drops by roughly $X” is a useful directional signal
- But it cannot replace the Monte Carlo simulator for understanding risk — you need to see the full distribution, not just the median, to assess whether your plan is safe
Use the What-If Calculator for quick gut-checks and exploration. Run the full simulation when you want to make actual decisions.
23. Historical Backtest
The Historical Backtest tab evaluates your strategy against every real historical sequence of U.S. market returns from 1928 through 2025 (98 distinct start years).
What it does
For each historical start year, the simulation runs one deterministic path through your plan horizon using actual historical returns for the S&P 500, 10-year Treasury bonds, T-bills, and CPI inflation. It then reports:
- Whether the portfolio survived
- The ending balance
- How many months fell short of the withdrawal target
How to read the results
- Success rate — the percentage of the 98 historical start years in which your plan would have worked. This is a different metric than the Monte Carlo success rate; it represents historical frequency rather than simulated probability.
- Worst start year — the historical period that produced the worst outcome (often a year that led into a major bear market early in retirement, such as 1966 or 2000)
- Best start year — the period that produced the best outcome
- Trajectory chart — all 98 historical paths overlaid; the worst, best, and median are highlighted
Important caveats
- The historical record contains only 98 data points, compared to 5,000 in the Monte Carlo simulation. Statistical confidence is much lower.
- Historical returns reflect the U.S. large-cap stock market (S&P 500 equivalent) and U.S. Treasuries. International stocks, small caps, real estate, and alternative assets are not included.
- For plan horizons longer than 98 years, start years near 2025 “wrap around” to 1928 to complete the sequence. These synthetic wrap-around sequences are flagged in the results.
- Past market history is not necessarily representative of the next 30–40 years.
Use the historical backtest to stress-test against the worst real periods on record (the Great Depression, the 1966–1982 stagflation, the 2000–2002 dot-com crash). It is a complement to Monte Carlo, not a replacement.
24. Reference Data
The Reference Data tab displays financial tables published by government agencies (IRS, SSA, CMS) that the simulation uses for tax calculations, RMDs, and Medicare. This data applies equally to all scenarios — it does not change per scenario.
What you can see and edit
Editable:
- RMD Onset Age — currently 73 under SECURE 2.0. If Congress changes this, update it here and the new age will take effect in all future simulations without requiring a software update.
Read-only (updated by editing data/config.json on the server):
- Federal income tax brackets (by year and filing status)
- Connecticut state income tax brackets (by year and filing status)
- IRMAA surcharge thresholds (by year and filing status)
- Medicare Part B and Part D base premiums (by year)
- IRS Uniform Lifetime Table (used for RMD calculations)
- Social Security PIA bend points (by year)
When reference data is updated
Congress and the IRS publish new tax brackets and thresholds annually. New data is reflected in the application when the data/config.json file is updated on the server. If that file is missing or malformed, the application automatically falls back to its bundled defaults — the app will never fail to load because of a configuration file problem.
25. Limitations and Known Constraints
Understanding what the model does not do is as important as understanding what it does.
Returns are normally distributed (standard mode)
In standard mode, the simulation assumes investment returns follow a normal distribution (the familiar bell curve). Real market returns have “fat tails” — extreme events (crashes and booms) happen more often than a normal distribution predicts. The Bootstrap mode (Section 10) addresses some of this by drawing from actual historical returns, but it is limited to the record since 1928.
Tax estimates are approximations
The model estimates taxes using simplified bracket calculations. It does not account for:
- AMT (Alternative Minimum Tax)
- Long-term capital gains tax rates on taxable account withdrawals (treated as ordinary income — conservative)
- Tax loss harvesting or cost-basis optimization
- Qualified dividend treatment
- State taxes outside of Connecticut
- Estate taxes
Use the tax estimates for planning direction, not precision.
SS benefit estimates assume continued employment
Your SSA statement estimate assumes you keep working until your claim age. If you retire early, your actual benefit will likely be lower than the statement shows because your lifetime earnings record will not include those additional working years.
Survivor benefit approximation
Survivor benefits are modeled at 75% of the deceased’s benefit. Actual SSA survivor benefits can be up to 100% of the deceased’s benefit in some circumstances. The model’s approximation is conservative.
Taxable account withdrawals treated as ordinary income
Long-term capital gains in taxable brokerage accounts are typically taxed at preferential rates (0%, 15%, or 20%), which are lower than ordinary income rates. The model treats all taxable withdrawals as ordinary income, which overstates your tax bill on taxable account withdrawals. This is a conservative assumption.
Roth 5-year rule not enforced
The model does not enforce the requirement that Roth accounts be held for 5 years before qualified distributions are tax-free. If you are dealing with recently opened Roth accounts, the actual tax treatment may be less favorable than the model assumes.
Inflation is a single index (with medical override)
The model uses one stochastic inflation index for all general spending, with an optional separate process for medical costs. In practice, different spending categories (housing, food, energy, education) have different inflation patterns.
Cross-batch optimizer comparisons
When the Optimizer evaluates large numbers of candidates, they are processed in batches. Candidates in different batches use different random market sequences (different “seeds”), so their success rates are not perfectly comparable. A difference of less than 1–2 percentage points in success rate between candidates from different batches may reflect random variation rather than a genuine difference in strategy. Use the Compare tab to make final decisions between close candidates.
No modeling of state taxes outside Connecticut
All state income tax estimates use Connecticut’s brackets and rules. If you live in a different state or plan to retire in a different state, the state tax figures are not applicable to your situation. Multi-state support is planned for a future release.
CT tax brackets inflated by CPI
Connecticut’s income tax brackets are assumed to inflate with CPI, consistent with the federal treatment. In practice, state legislatures may change rates and brackets at any time.
No transaction costs or fund expenses
The model does not deduct investment management fees, fund expense ratios, or trading costs. For index funds with expense ratios under 0.1%, this is immaterial. For actively managed funds or variable annuities with higher fees, subtract the annual fee from your return assumptions manually to compensate.
26. Glossary
After-tax legacy — the amount your heirs would actually receive from your estate after paying income tax on inherited Traditional (pre-tax) accounts, calculated using your configured heir tax rate.
Asset allocation — the mix of investment types (stocks, bonds, cash) across your accounts. Affects both expected returns and volatility.
Bootstrap mode — an alternative return-generation method that draws returns from actual historical market data (1928–2025) rather than a mathematical model. Preserves real-world patterns but is limited to the historical record.
Cascade — the automatic process by which the simulation shifts withdrawals to the next available account type when the targeted account type is depleted.
CAGR (Compound Annual Growth Rate) — the geometric average annual return that accounts for compounding. Lower than the arithmetic mean for volatile assets. The standard way to express long-run investment returns.
COLA — Cost of Living Adjustment. An annual increase applied to a benefit (such as Social Security) to keep pace with inflation.
Deterministic simulation — a simulation with no randomness; every run produces the same result. Used by the What-If Calculator and Historical Backtest.
Distribution period — the divisor used in the RMD calculation, from the IRS Uniform Lifetime Table. Represents the expected remaining years of distributions based on your age.
FRA (Full Retirement Age) — the age at which you receive your full Social Security benefit with no early-claim reduction or delayed-credit increase. Depends on birth year; currently 67 for those born in 1960 or later.
Heir tax rate — the estimated marginal income tax rate your beneficiaries will pay on inherited Traditional (pre-tax) account distributions. Used to calculate after-tax legacy.
IRMAA — Income-Related Monthly Adjustment Amount. A Medicare surcharge applied to Part B and Part D premiums when your income in the prior year exceeds certain thresholds. The surcharge is assessed per person.
Latin Hypercube Sampling (LHS) — a statistical method for efficiently sampling a large search space. Ensures broad, non-clustered coverage of the space with fewer samples than random or grid search.
Legacy — the total portfolio value remaining at the end of the plan horizon. A key output metric if leaving wealth to heirs or charity is part of your planning goals.
MAGI (Modified Adjusted Gross Income) — the income measure used for IRMAA calculations. Broadly, your total income from all sources before standard deductions.
Medicare eligibility age — the age at which you become eligible for Medicare. Currently 65 for most people; may be earlier for those who qualify through disability.
Medigap — supplemental insurance that covers Medicare cost-sharing (deductibles, co-insurance). Also called Medicare Supplement insurance. Configured per person on the Household tab.
Monte Carlo simulation — a method of modeling uncertainty by running thousands of independent random scenarios and summarizing the distribution of outcomes. The foundation of this application’s projections.
Nominal vs. real — nominal dollar values are not adjusted for inflation (the actual future dollar amounts). Real dollar values are deflated to today’s purchasing power. The Results tab lets you toggle between these views.
Percentile — a value below which a given percentage of observations fall. The 10th percentile ending balance means 10% of simulations ended with less than that amount; 90% ended with more.
PIA (Primary Insurance Amount) — the Social Security benefit a worker is entitled to at their Full Retirement Age. Derived from the worker’s lifetime earnings record. Early claiming reduces it; delayed claiming increases it.
Plan horizon — the period from today (or the plan start date) to the plan end age. The simulation models your finances across this entire span.
Pro-rata — proportional to balance. When the simulation draws from multiple accounts of the same type, it takes from each in proportion to its current balance.
RMD (Required Minimum Distribution) — the IRS-mandated minimum annual withdrawal from Traditional 401K and Traditional IRA accounts, beginning at age 73. Failure to take the full RMD results in a 25% excise tax on the shortfall.
Roth conversion — the act of moving funds from a Traditional (pre-tax) account to a Roth (after-tax) account, paying ordinary income tax on the converted amount in that year. Future growth and withdrawals from the Roth account are then tax-free.
Sequence of returns risk — the risk that a bad sequence of investment returns early in retirement permanently impairs your plan, even if long-run average returns are acceptable. One of the key risks modeled by the Monte Carlo approach.
Shared seeds — a technique where all strategies in a comparison use the same underlying random market sequences. Ensures differences in outcomes are attributable to the strategy, not the random draw.
Shortfall — a month in which the simulation cannot fully fund your withdrawal target after exhausting all accounts.
Stochastic — random; varying according to a probability distribution rather than a fixed value.
Uniform Lifetime Table — the IRS table (Pub 590-B, Table III) used to calculate Required Minimum Distributions. Provides a distribution period for each age, governing how quickly Traditional account balances must be drawn down.
Volatility — a measure of how much an investment’s returns vary from year to year. Higher volatility means a wider range of possible outcomes (both better and worse than the expected return).