Retirement Monte Carlo
What is a risk-based “guardrails” retirement plan? ▾
A guardrails plan is a flexible retirement spending method. Instead of withdrawing a fixed amount every year, you set high and low “rails.” In this model we adjust when you reach 99% success and 45% success. When markets and your portfolio do well (reach 99%), spending can move up toward the upper rail; when markets struggle (reach 25%), spending nudges down toward the lower rail. The aim is to keep your plan inside a sustainable range over time—not to promise a specific outcome.
How it compares to the “4% rule” baseline
- 4% rule (fixed): Withdrawal ~4% of your portfolio in year one, then adjusts that dollar amount with inflation every year—regardless of returns. It’s a simple benchmark from classic academic work (popularized by the “Trinity Study”).
- Guardrails (flexible): Start with a reasonable income and review annually. If success odds rise above your band, you take a raise; if they fall below, you trim. This adapts to real markets and can reduce the risk of running out while letting you spend more when times are good while not reacting too fast when markets go down.
What this calculator does
- Estimates success odds via Monte Carlo (many possible market paths).
- Shows raise/cut guidance based on your current odds and chosen guardrails.
- Includes pensions & Social Security with the “Total income (pension + Social Security)” engine, or analyzes just portfolio withdrawals with “Legacy.”
Important: No calculator can guarantee outcomes. Markets, inflation, taxes, fees, and your spending can change. Treat these results as decision support, not a promise.
Sources / further reading: Investopedia – 4% Rule · Investopedia – Guardrails Strategy(inspiration for the site) · Trinity Study summary (archival link)
Why guardrails can feel better in practice ▾
Because spending adjusts with results, you’re less likely to get stuck with an overly tight number in strong markets—or cut withdrawals too quickly when markets decline.
Switch between Total-income (pension-aware) and Legacy engines. Guardrails: raise near 99% success, cut near 25%; resets target to ~80% / ~45% success.
Model: 60/40 real returns (stocks 6%±18%, bonds 0%±6%, ρ=0.10). Spending is flat in real terms unless guardrails adjust it. Pension grows by real COLA (nominal COLA − CPI). Simulated, not guaranteed; taxes/fees/extremes not fully modeled.
Inputs
Engine
Total income (pension + Social Security) — Amount is based on total household income in retirement: guaranteed income (pensions/SS) + portfolio withdrawals. If guaranteed income rises with COLA, portfolio withdrawals can be smaller to reach the same total. You can enter either or both. Leave any field blank if not applicable.
Legacy (portfolio withdrawals only) — Ignores pensions/SS when setting spending and treats withdrawals from the portfolio as the spending engine. Use this if you don't want to count on SS or a pension.
Starting income mode
- Tune to ~80% success — Solver picks a starting income that makes the plan succeed through to the end age in ≈80% of Monte Carlo paths.
- Manual by % — You choose a withdrawal rate (% of portfolio). Total income = portfolio withdrawal + guaranteed income.
- Manual by $ — You choose a dollar withdrawal from the portfolio. Total income = that withdrawal + guaranteed income.
Ages
Your age / Planned retirement age / End age define the simulation window. The horizon is from the retirement age through how long you expect the plan to run until (age).
SS claim age and Pension start age determine when guaranteed income begins.
Initial portfolio ($)
Beginning investment balance at retirement (or at analysis start) used for Monte Carlo draws.
CPI (% nominal)
Assumed long-run inflation. CPI is also used with COLA to compute the first payment in today’s dollars
Initial withdrawal (% or $)
Choose a % rate on the portfolio or a dollar amount. In Total-income mode, total income = guaranteed income (pension/SS) + portfolio withdrawal.
With “Tune,” the solver picks a starting income that targets ≈80% success out of #of runs through Monte Carlo.
Pension (amount & COLA)
Enter the pension in today’s dollars and a nominal COLA (if any). We project the first check’s today-dollar value by compounding real growth from today to the first payment:
First payment (today’s $) = amount × ((1 + COLA) / (1 + CPI))years until first payment
Example: $30,000 benefit, 2.5% COLA, 3.0% CPI, 10 years to first payment → $30,000 × (1.025/1.03)10 ≈ $30,000 × 0.953 ≈ $28,590 (today’s $).
After payments begin, the stream grows in real terms at approximately COLA − CPI (exact: (1+COLA)/(1+CPI) − 1). If COLA ≈ CPI, purchasing power stays ~flat.
Social Security (amount & COLA)
Enter your estimated annual Social Security in today’s dollars and its nominal COLA. The first check’s today-dollar value is:
First payment (today’s $) = amount × ((1 + COLA) / (1 + CPI))years until first payment
Example: $30,000 estimate, 2.5% COLA, 3.0% CPI, 10 years to claim → $30,000 × (1.025/1.03)10 ≈ $28,590 (today’s $).
Once it starts, we grow the benefit in real terms at approximately COLA − CPI (exact: (1+COLA)/(1+CPI) − 1). If COLA ≈ CPI, purchasing power is ~flat.
Raise income target (%)
We compute the portfolio value required to increase total income by this percent and then “reset” to ≈80% success at that higher income.
Apply guardrails
Rules that adjust spending when success odds are very high or very low:
- Upper trigger (~99%): If success reaches ~99%, raise income, then retarget to ≈80% success.
- Lower trigger (~25%): If success falls to ~25%, cut income, then retarget to ≈45% success.
Between triggers: no adjustment — you stay the course with the current income.
Monte Carlo paths
Number of simulated return paths. More paths → smoother statistics but slower runs.
Results
Spending stability
Estimated success rate of stable spending without cuts: fraction of simulated paths where the plan never depletes the portfolio over the horizon. We show a 95% confidence range from the finite number of sims.
Starting income
Total income in year 0 of retirement (portfolio withdrawal + guaranteed income). With “Tune,” this is solved to ≈80% success.
Year-0 breakdown
Shows how much of total income comes from the portfolio vs. guaranteed sources and the implied initial withdrawal rate on the portfolio.
Eligible raise now
If today’s success is ≥ upper trigger (~99%), we display the higher income consistent with resetting to ≈80% success immediately.
Modest raise (+X%)
Portfolio value needed today to lift income by the target % and still sit at ≈80% success afterwards. We also show the new income level at that reset.
Cut threshold (~25%)
Wealth level at which you’d likely reduce income so the plan resets to ≈45% success, avoiding rapid depletion in bad markets.
Implied withdrawal rate
Portfolio-sourced income ÷ current portfolio value. Useful for comparing to classic “4% rule” style heuristics.