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Success Rate Formula:
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The Firecalc Retirement Calculator determines the success rate of retirement plans by analyzing historical market data through Monte Carlo simulations. It calculates the percentage of simulations where retirement funds last throughout the retirement period.
The calculator uses the success rate formula:
Where:
Explanation: This formula calculates the percentage of retirement scenarios where the funds lasted throughout the entire retirement period based on historical market performance.
Details: A higher success rate indicates a more robust retirement plan. Typically, a success rate of 85-95% is considered safe, while rates below 80% may require adjustments to spending or retirement timing.
Tips: Enter the number of successful simulations and total simulations from your Firecalc analysis. Both values must be positive integers, with passed simulations not exceeding total simulations.
Q1: What is considered a good success rate?
A: Generally, 85-95% is considered good. Above 95% may indicate overly conservative planning, while below 80% suggests higher risk of running out of funds.
Q2: How many simulations should I run?
A: Firecalc typically runs 100-120 historical scenarios. More simulations provide more statistical reliability but require more computation time.
Q3: What factors affect the success rate?
A: Withdrawal rate, asset allocation, retirement duration, inflation, and market performance all significantly impact the success rate.
Q4: Can I trust a 100% success rate?
A: While 100% is ideal, it's based on historical data. Future market conditions may differ, so maintaining some flexibility in spending is recommended.
Q5: How often should I recalculate my success rate?
A: Annually or when significant life changes occur (market shifts, spending changes, inheritance, etc.) to ensure your plan remains on track.