Is Monte Carlo OverEstimating Your Retirement Risk

[@jimhoge3252]

One of your better videos. Thanks for not going political today. So Monte Carlo projects a huge range of probability and is altered conservative. But majority of financial planners in their planning… Conclusion is most financial planners are ultra conservative and don’t want you to spend your last dollar!

[@kenm2679]

Damn, the earth is not flat! Thank Josh for this PVC Pipe of Knowledge head's up! Merry Christmas and have a Happy New Year!

[@MidlifeCrisisManagement]

this is a PVC Pipe of Knowledge-worthy video, Josh. great breakdown.

[@classics-wz1bz]

Most certainly. Think about the worst scenarios/simulations where you have significant losses year over year and the withdrawal/draw-down scenario is not dynamic to account and adjust for those situations? You wouldn't do a simplistic replacement rate draw-down from your accounts and withdraw similarly from a year where you have 20% growth vs. a year that saw a 50% decline. now if you had a monte carlo simulation that dynamically adjusted withdrawal rate to coincide w/ yearly losses and gains it'd be a little more realistic, but most models that I've seen don't offer that dynamic capability (although it'd be fairly easily to account for in the code; if stocks are down this much, reduce your withdrawals by x).

[@tomgradel4999]

This is a good argument for using backtesting (historical) return rates to test retirement parameters: use every 30 year scenario from the past and apply it to estimate future returns.

[@wisulliv]

I think it does because it does not take into account what you showed that people spend less as they get older. Unless I am missing something it also does not account for the planning we do to negate the affect of the hugh swing in stock prices.

[@longbowrider]

Josh...You explained this extremely well!

[@kennethwers]

Monty does not take human nature into consideration. Most people will take a pay cut when the market is way down. If you take 6% of your yearly balance you will never run out of money. But your payday will not be stable as it is in your working years. 6% of 600,000 is 36,000 But 6% of 300,000 is 18,000 Plus SSA

[@ralphparker]

Consider this: If you use the annual standard deviation and use a monte carlo to estimate the 10 year standard deviation you will have a significantly larger standard deviation than the standard deviation you get from analyzing the rolling 10 returns. My explanation is that the annual standard deviation doesn't account for the "Return to the Mean" pressure in the stock market that we know always exist.

[@cutehumor]

Will us senate pass the social security fairness act today to overturn gpo/wep? It’s the last day to do it!

[@DaninPNW]

No

[@cutehumor]

@@DaninPNW The Senate passed the social security fairness act. GPO and WEP is gone, when Biden signs it into law.

[@cutehumor]

@@DaninPNW it passed 😊

[@edhettwer7920]

I don’t think in my case… I’m at 99% and I’m not that wealthy. My thoughts are… they too easy?