About RetirementSimulation.com

About RetirementSimulation.com

RetirementSimulation.com uses past data to predict how long an investment will last during retirement. We use data from the S&P 500, 10 Year Treasury Bond, and 30 Day Treasury Bills, as well as US inflation data. For each year, we use a random return and inflation amount. This simulation is then run thousands of times.

The simulation assumes that the future will look like the past. However, we added features such as a stock market crash and the opportunity to raise and lower returns. For example, if you modify stock returns up by 1%, the random return for each year will go up 1% (ie. a 7% return will become 8%).

How to use: Enter your current age and the age when you retire. Then enter your current savings, the amount that you can save annually before you retire, and the amount that you plan to withdraw after retirement. Your annual deposits and withdrawals take inflation into account. For example, if you need $50,000 to live on in retirement using today's dollars, we will automatically take into account the cost of living for your retirement years. The same is true for your annual deposits. Next, decide if you'd like to simulate a stock market crash.

In the portfolio section, choose the makeup of your portfolio with stocks, bonds, and cash. Cash assumes that your money is stored in a savings account. You can then alter the future returns and inflation. For example, if the market has historically returned about 10%, but you think the future will be worse, modify the stock returns by -3%, and the future returns will average out to 7%.

Who created RetirementSimulation.com?
I'm John Hostetler. I've studied data science and finance at the University of Michigan. It is also owned by my brother Dan, who studied computer engineering at the University of Michigan. He has experience using large datasets to backtest investment strategies.

What are the challenges of using a monte carlo simulation?
The simulation is better used as a learning tool rather than predicting the odds of financial success during retirement. If the economy of the US performs like the past, your retirement will probably be fine. However, the history of the world is a story of empire expansion and collapse. The debate over a 4% or 3.5% withdrawal rate is probably less important than an extreme event that could make retirement savings irrelevant.

How to save for retirement?
For most people, I'd recommend investing in low fee index funds while minimizing taxes. Utilize retirement accounts first and then invest additional savings into an after tax account.

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