Volatility is the year-to-year swing in returns (higher = wider range of outcomes). Other income — Social Security, a pension or annuity — reduces what your portfolio has to cover each year in retirement.
Monte-Carlo simulation uses 1,000 randomised scenarios with annual real returns drawn from a normal distribution (mean = your expected return minus inflation; standard deviation = the volatility input). Everything is in today’s dollars: returns are real (your expected return minus inflation) and spending stays constant in real terms, so a higher inflation rate simply lowers the real return. Taxes and the exact timing of Social Security or pensions are not modelled. Real markets vary — this is an educational projection, not advice.
Build the portfolio behind the plan
This simulates a single balance. Create a free Kapio account to build a real portfolio of stocks, ETFs and index funds, then run a Monte-Carlo projection on actual historical returns — not just a normal-curve assumption.
Test this against real holdings
Open the portfolio builder to model the actual funds behind your plan and run a Monte-Carlo projection on real historical returns.
How much do I need to retire?
The amount depends on your annual spending, how long you expect to live in retirement, and what your investments return. A common starting point is the 25x rule: multiply your desired annual spending by 25. To spend $50,000 a year you would need roughly $1.25 million by retirement, based on the 4% safe withdrawal rate — the level research suggests gives a high chance of not running out over a 30-year retirement.
How this calculator works
It runs two phases. In the accumulation phase, from your current age to retirement, it grows your savings with investment returns and monthly contributions. In the withdrawal phase, from retirement to your life expectancy, it deducts your spending — kept in today’s dollars — while the remaining balance keeps earning a real return. Rather than assuming one fixed return, the Monte-Carlo engine runs 1,000 scenarios with randomised returns, so you see the full range of outcomes — including the bad ones — and a probability of success.
Why Monte Carlo matters
A projection that assumes a steady 7% every year is misleading. Real markets are volatile: some years up 30%, others down 20%. In retirement the order of returns matters enormously — a crash in the first few years can sink a portfolio even when the long-run average is fine. Monte-Carlo simulation captures this sequence-of-returns risk by sampling thousands of random paths, turning a single optimistic number into an honest probability.
The 4% rule, and its limits
The 4% rule comes from the Trinity Study of historical US stock and bond returns: withdraw 4% in year one, then adjust for inflation. It had a high success rate over 30-year windows, but it was built on a favourable historical period, ignores taxes and fees, and 30 years may be too short for an early retiree. Treat it as a guide, then pressure-test your own numbers here.
Frequently asked questions
What probability should I aim for?
Most planners target at least 80–90%. Below 70%, consider saving more, spending less, or retiring later. Above 95% can mean you are being overly cautious and could comfortably spend a bit more.
What return should I assume?
A diversified stock-and-bond portfolio has historically returned 6–8% after inflation. A 7% nominal return with 3% inflation (about 4% real) is reasonable for a balanced mix. Returns above 8% imply a very aggressive, stock-heavy allocation.
Does it include Social Security or a pension?
Yes — open Advanced and enter your expected annual income from Social Security, a pension or an annuity. It reduces what your portfolio must cover each year, which usually lifts your probability of success noticeably.
How does inflation affect this?
The simulation works entirely in today’s dollars using a real return (your expected return minus inflation), so you never have to inflate your own figures. A higher inflation rate lowers that real return and makes the plan harder; spending you enter stays in today’s purchasing power.
My probability is low — what helps most?
Working two or three more years is often the strongest single lever, because it adds saving years and shortens the withdrawal period at the same time. After that: higher contributions, lower retirement spending, or part-time income early in retirement.