Most people think retirement planning is about hitting a single “magic number.” But the real question isn’t how much you’ve saved—it’s whether that money will last through every kind of market, good, bad, and everything in between. That’s exactly where Monte Carlo analysis comes in.

What Is Monte Carlo Analysis?

Unlike a straight-line projection that assumes one average rate of return, Monte Carlo analysis runs thousands of possible market scenarios. It mixes in the good years, the bad years, and everything in between. The result is a probability score—a measure of how likely your plan is to succeed across many possible futures.

This approach is powerful because real life doesn’t happen in averages. Markets swing, inflation rises and falls, and interest rates shift. Monte Carlo gives you a way to see how your plan holds up when the unexpected happens.

Why the Sequence of Returns Matters

One of the biggest risks in retirement is something called the sequence of returns.

When you’re still saving, the order of returns doesn’t matter much. A bad year or two eventually averages out. But once you start withdrawing—like in retirement or after selling a business—the timing of market swings becomes critical.

If the market drops early in retirement, you could be forced to withdraw money from a shrinking portfolio. That leaves fewer dollars invested to rebound when the market recovers. Two people with the same average return can have very different outcomes depending on when the bad years hit.

Monte Carlo captures this reality by stress-testing your plan across countless return sequences.

Balancing Risk and Stability

Monte Carlo analysis also accounts for how different asset classes perform under stress:

• Stocks drive growth but can be volatile.
• Bonds provide income and stability, but are sensitive to interest rates.
• REITs add diversification but follow real estate cycles.
• Inflation steadily erodes spending power over time.

By factoring all of these in, the analysis shows how your portfolio might behave across different conditions.

Why This Matters for You

At Clarity Wealth, we run Monte Carlo analysis regularly for clients. The goal isn’t just to see if your money might last—it’s to maximize how much you can comfortably spend in retirement without living in fear of running out.

You’ve worked your whole life to enjoy retirement. A strong plan should give you both the freedom to spend and the confidence that your portfolio can weather downturns.

The Bottom Line

Monte Carlo analysis doesn’t predict the future. It prepares you for many possible futures. A retirement plan that only works when markets are calm isn’t a plan at all. A resilient plan is one that holds up even if the early years are rocky.

If you’re approaching retirement—or preparing to draw income after a business sale—Monte Carlo analysis could be the peace of mind you need. Because in retirement, confidence is just as valuable as cash flow.