Ep #196 - Don't Bet Your Retirement On a Monte Carlo Projection

Grow Money Business with Grant Bledsoe

We dedicated this week’s episode of Grow Money Business to the Monte Carlo simulation. When multiple outcomes are possible due to the presence of random variables, a Monte Carlo simulation can be used as a model to forecast their probabilities. Join us as we dive into what Monte Carlo simulation is, where it comes from, the assumptions that are used in this kind of analysis, and how much trust we can put in these kinds of analyses when we are making decisions regarding retirement.

[04.31] 4% withdrawal rule – Grant starts the conversation by explaining how the 4% withdrawal rule works.

[08.46] eMoney Advisor – Grant dives into eMoney Advisor, a leading provider of technology solutions and services that help people talk about money.

[17.16] Success versus failure – Grant shares his thoughts on the “chances of success” versus “chances of failure” feature of the Monte Carlo simulation.

[23.03] Form of analysis – Grant talks about the importance of not relying solely on Monte Carlo simulations, but also looking at things like cash flow implications and tax ramifications.

[27.01] Different options – Grant explains how to sort out the best form of analysis according to your background.

Resources

Monte Carlo Simulation — A Practical Guide

towardsdatascience.com/monte-carlo-simulation-a-practical-guide-85da45597f0e

Opinion: Should you use a Monte Carlo simulation to determine if your retirement savings will last?

marketwatch.com/story/should-you-use-a-monte-carlo-simulation-to-determine-if-your-retirement-savings-will-last-11611607222

The Problems With Monte Carlo: Why Simulations May Not Predict Your Success in Retirement

bairdretirementmanagement.com/insight-articles/the-problems-with-monte-carlo-why-simulations-may-not-predict-your-success-in-retirement/

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[08.46] And the program that we use …………… returns might be.