I was playing around with a retirement planner software and it ran one of those simulation. It return 100%. I then recall a Michael Kitce article about why 50% success rate does not mean your retirement will fail if you are willing to be flexible. Most people compare monte carlo simulation as an airplane flight where they estimate how likely you will get to your destination without crash. I am no aerospace engineer, but a 90% success rate would probably be bad since 10% of the people who ride the plane would die. However, a 90% success rate means your retirement would failed 10% of the time if you make no changes to the plan. You can probably have a chance to self-correct in the decades of your retirement.
It seems that it's important to come up with a fixed and flexible expense. If retirement is failing, you can reduce the flexible expense. Your quality of life may reduce but at least it's still comfortable living. I wonder if one should run the two simulation on fixed and fixed + flexible and have the fixed expense being the one with closer to 100% success.
100% succeess is probably oversaving and probably not the way to go if you are going for die broke. However, I feel that savers in general are a cautious lot. Many of use will save a lot for retirement but then retain our miserly ways upon retirement because savers are cautious. Those who are cautious enough to run Monte Carlo are less likely to needed. Those who arrived at retirement with zero saving obviously never ran one.
Can monte carlo be run to detect if your retirement is failing and make course corrections? I am not retired and is curious to know. Are there other ways to tell if your retirement is failing since our asset might dwindle as you live through your retirement.
It seems that it's important to come up with a fixed and flexible expense. If retirement is failing, you can reduce the flexible expense. Your quality of life may reduce but at least it's still comfortable living. I wonder if one should run the two simulation on fixed and fixed + flexible and have the fixed expense being the one with closer to 100% success.
100% succeess is probably oversaving and probably not the way to go if you are going for die broke. However, I feel that savers in general are a cautious lot. Many of use will save a lot for retirement but then retain our miserly ways upon retirement because savers are cautious. Those who are cautious enough to run Monte Carlo are less likely to needed. Those who arrived at retirement with zero saving obviously never ran one.
Can monte carlo be run to detect if your retirement is failing and make course corrections? I am not retired and is curious to know. Are there other ways to tell if your retirement is failing since our asset might dwindle as you live through your retirement.
Statistics: Posted by gavinsiu — Sat May 25, 2024 12:56 pm — Replies 3 — Views 310