# Excel Monte Carlo Retirement Calculator

Published: December 7, 2013 at 7:24 pm

Last Updated on December 18, 2021 at 10:34 pm

The importance of a solid retirement plan cannot be stressed enough. The importance of ‘stress testing’ a retirement plan also cannot be stressed enough! Here is an Excel Monte Carlo Retirement Calculator that allows you to do just that!

If you wish to plan for your retirement,

That sounds good and doable. The only trouble is, when we use a retirement calculator, we used a fixed number for inflation, pre-retirement return and post-retirement return.

We know from experience that none of these numbers are fixed. So we need to find out how good our retirement plan is.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

In order to do this, we will have to vary inflation and returns. That is, introduce some volatility. We can then determine the probability of achieving our goal.

There are two ways to introduce volatility in financial goal planning.

1. Use historical data. Known as back-testing or aft-casting
2. Randomly vary inflation and return numbers using a pre-defined distribution (uniform distribution, normal distribution etc.)

To do a back-testing we will need to use several decades of market data in order to get reliable results.  This is possible with US markets. Here is a fantastic online calculator: FIRECalc

The first ever calculator I made was based on back-testing methods outlined in this book: Unveiling The Retirement Myth, by Jim Otar

It was not in Excel but in a platform known as Labview, that I use for my experiments. Unfortunately, after spending months on it, I realised that it is useless for India since the market here is young, and we have only about 35 years of market data.

Since each market cyclelasts a few years (4,5 or even 10), we will need several 10s of such cycles for the data to be reliable. Therefore, we would need several decades of market history.

That leaves us with the Monte Carlo technique. Although this has several limitations (eg. pretty difficult to imitate the market with a statistical distribution), we don’t have a choice.

Monte Carlo is famous for its gambling. In a Monte Carlo Retirement calculator, the inflation and returns (pre- and post-retirement) are varied randomly (hence the gambling analogy). We could then determine

• how long a corpus is likely to last
• how much corpus we are likely to need
• how much monthly investment is needed for maximising the probability of success.

Safe to say, there are many ways to do this!

I made MC retirement calculator in Excel a while back. It allows you to randomly vary inflation and returns simultaneously a good 50,000 times! I have now made this more user-friendly.

The calculator tells you, the likely effectiveness of a retirement plan for a given investment amount. If the result is less favourable (it will most likely not be!), don’t get upset. Try to reduce expenses and invest a little more.

New version:  Stress Test Your Retirement Plan (Aug. 2014)

I will be delighted to hear your thoughts on stress-testing a retirement plan.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth!  You can watch podcast episodes on the OfSpin Media Friends YouTube Channel. 🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
• Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
• Have a question? Subscribe to our newsletter using the form below.
• Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via or Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available! Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost!