When you make a financial plan/calculation you usually assume some inflation rate and interest rate. However, there is no guarantee that these rates will be the same as the ones you assumed. If actual inflation was lower and actual interest rates higher, great! Well you know that is a pretty rare scenario. What is likely to happen is inflation could be higher and interest rates lower, maybe because of the economy, markets falling etc. etc.
There is nothing you can do about it ... except perhaps mentally prepare for it. The Monte Carlo calculator does just that.
Monte Carlo is famous for gambling and the calculator does the same. It gambles with inflation and interest rates. By gamble I mean it randomly varies these rates a large number of times (I have used 50,000 trials) and calculates the most probable number of years a retirement corpus will last by using a 'amount which one can save' as input. It also gives the 'amount which one should save' to increase the chances of the retirement corpus lasting your lifetime.
The calculator is easy enough to use. The instructions are reasonably clear.
New version: Stress Test Your Retirement Plan (Aug. 2014)
(This is a dropbox link. Clicking on this will take to DropBox's website)
Subscribe to get posts via email
|You Can Be Rich Too With Goal-based Investing A book that can help you ask the right questions about money and find simple solutions. Comes with nine online calculator modules. Read more about the book and order now!|
GameChanger - Forget Startups, Join Corporate & Still Live The Rich Live You want Take that international trip at 50% lower costs! Optimise credit card usage! Set money management on auto-pilot! Read more about the book and order now!