Glossary · Risk and suitability
Monte Carlo simulation
A Monte Carlo simulation runs a plan across many randomized return sequences to estimate the probability that it succeeds.
It returns a percentage, usually in the eighties, and clients nod. The number is far more sensitive to its assumptions — return, inflation, sequence, spending — than the confident single figure suggests.
Its honest use is comparative rather than absolute: this plan versus that one, not a promise.
Read more: What planning software gets wrong →
Questions this did not answer? Ask them directly — that is what the twenty minutes is for.