Calculate the probability your retirement savings will last using a Monte Carlo simulation of market returns based on your savings, contributions, spending, and time horizon.
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Retirement Success Probability Formula
Success % = (N_success / N_total) x 100
The model simulates many possible market futures and counts how often your money lasts. Each simulated path updates your balance one year at a time:
B(t+1) = B(t) x (1 + r(t)) + C(t) - W(t)
Where:
N_success is the number of simulated paths in which the balance never drops below zero through your planning age.
N_total is the total number of simulated paths (this calculator uses 2,000).
B(t) is the portfolio balance at the start of year t, in today's dollars.
r(t) is the inflation-adjusted (real) return drawn at random for that year from a normal distribution set by your expected return and volatility.
C(t) is your contribution during year t, applied only in the years before retirement.
W(t) is your net withdrawal during year t in retirement, equal to annual spending minus any other retirement income.
A path counts as a success when the balance is still positive at your planning age. The probability of success is simply the share of all paths that succeed.
Interpreting Your Result
A higher probability means a wider safety margin against weak markets, long life, and inflation. Use the ranges below as a rough guide.
| Probability of success | Reading |
|---|---|
| 90% to 100% | Strong. The plan holds up across most market outcomes. |
| 75% to 89% | On track. Reasonable, with some room to tighten spending or save more. |
| 50% to 74% | Borderline. A weak market early in retirement could cause a shortfall. |
| Below 50% | High risk. The plan needs more savings, lower spending, or a later start. |
Common Planning Assumptions
The advanced inputs default to broad long-run figures. Adjust them to match your own portfolio and outlook.
| Input | Typical range | Default used |
|---|---|---|
| Expected annual return | 4% to 8% | 6% |
| Return volatility (std dev) | 8% to 18% | 12% |
| Inflation | 2% to 4% | 3% |
Example Calculations
Example 1. You are 40, plan to retire at 65, and want the plan to last through age 90. You have $300,000 saved, add $20,000 each year, expect to spend $55,000 per year, and will receive $25,000 from Social Security. Net withdrawal is $30,000 per year. With the default 6% return, 12% volatility, and 3% inflation, the simulation returns a probability of success near 93%, which reads as strong.
Example 2. You are 50, plan to retire at 62, and want coverage through age 92. You have $120,000 saved, add $8,000 a year, plan to spend $60,000, and expect $18,000 of other income. Net withdrawal is $42,000 per year over a 30-year retirement. The probability of success falls below 5%, signaling that you need to save more, spend less, or retire later.
Frequently Asked Questions
What does probability of success actually mean? It is the percentage of simulated market histories in which your savings last through your chosen planning age. A result of 85% means the plan survived in 85 out of every 100 simulated futures, including many with poor returns.
Why is a probability of 100% not the goal? Reaching 100% usually means you are saving far more or spending far less than you need, leaving a large balance unspent. Many planners treat a result in the high 80s to mid 90s as a healthy target that balances security against over-saving.
Why does the result use today's dollars? Returns are converted to real, inflation-adjusted values, so your spending keeps the same buying power every year. This lets you judge the outcome in money you understand now rather than inflated future figures.