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Glossary

Monte Carlo retirement simulation

Monte Carlo retirement simulation runs many possible future paths instead of assuming one steady return pattern.

  • It is a stress-testing method, not a guarantee.
  • It explores uncertainty through many modeled outcomes.
  • It works best alongside scenario planning and clear assumptions.
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Definition

Monte Carlo retirement simulation is a way of testing a retirement plan by running many possible future return sequences instead of relying on a single average-return path.

Why people use it

Retirement plans are sensitive to both returns and the order in which those returns arrive. Monte Carlo analysis helps show how uncertainty can affect plan durability.

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