How accurate are Monte Carlo retirement projections?

What a Monte Carlo projection actually does

Most retirement calculators assume one fixed rate of return — say 7% every year — and hand you a single ending balance. Real markets don't work that way. A Monte Carlo projection instead runs the same plan through hundreds of different simulated market sequences, each with its own ups and downs, and reports how many of them succeed. Reckon Wealth runs 500 such simulations and tells you the percentage in which your money lasts through retirement.

Why a single number is misleading

The order of returns matters as much as the average — this is called sequence-of-returns risk. Two retirees with the same average return can end up in very different places if one hits a market crash in their first few retirement years and the other hits it later. A single-number calculator hides this entirely. A probability of success surfaces it: a plan that works in 85% of simulations is meaningfully safer than one that works in 55%, even if both share the same average return.

So how accurate is it?

The honest answer: it's an estimate, and its quality depends on its assumptions. Monte Carlo can't know future inflation, your actual returns, or how your spending will change. What it does well is show how sensitive your plan is to those unknowns. That's why Reckon Wealth lets you run conservative, base, and optimistic scenarios — if your plan holds up across all three, you can be far more confident than if it only works in the optimistic case.

How to read your result

As a rough guide, a success probability of 70% or higher is generally considered solid for a standard 30-year retirement; if you're retiring early with a longer horizon, you'd want to aim higher or stay flexible on spending. Treat the number as a confidence gauge, not a promise — and re-run it as your real numbers change.