Why is Monte Carlo useful or important for retirement planning?
Monte Carlo allows you to develop a financial plan that accounts for risk. It will show, for example, whether your investments yield a fairly stable portfolio or a high risk portfolio. It is remarkable that in this day and age, most investors (even those who are well off) have no solid sense of how risky their portfolios are. In Quantext’s Monte Carlo models, we calculate the probability that you will run out of money at some age, given your projected retirementage and income, current portfolio, future savings, portfolio allocation and other factors. The probability of running out of money by a certain age in retirement is a very solid risk metric and one that is important for planning. The Monte Carlo model allows the user to tailor the portfolio to achieve a risk-return balance that is right for them. If you have a portfolio with very high risk and return, such as being heavily invested in technology, you can grow a portfolio fast but you can also lose a lot fast. On the other hand,
