Janna Herron at Barron's wrote about the Monte Carlo score, retirement planning's most misunderstood number, and quoted me.
A Monte Carlo simulation stress tests a retirement plan against a thousand different market and inflation scenarios and returns a percentage. A 65% score means roughly a two-thirds chance the plan holds up. Most people assume higher is always safer and chase 99% or 100%.
Here is what I told Barron's: the score tells you how likely your plan is to succeed, and also how likely you are to run out of money chasing an unrealistic goal. A near-perfect score often means you are holding back spending you have earned the right to enjoy, which is why many planners aim closer to 85%. The score isn't a report card. It's a dial, and turned too high you leave a life unlived to protect against a scenario that mostly doesn't happen.
The real value is what the score says about the levers you can pull if the market has a bad stretch right when you retire. Work a little longer. Pick up part-time income so you draw less from the portfolio. Tap home equity instead of selling stocks at a low. Stay flexible on spending. None of that requires panic. It requires a plan that already accounted for the bad years, not just the good ones.
Read the full article at Barron's →
