Monte Carlo's Role in Retirement Planning
This statistical method is designed to help improve your odds of meeting your financial goals but is not without its flaws.
Question: I've seen some online retirement calculators mention that they use a Monte Carlo simulation. What is that?
Answer: A Monte Carlo simulation might sound like a ride you'd find at Disneyworld, but it's actually a statistical method used to determine probability and assess risk. At its most basic, a Monte Carlo simulation allows the user to determine the likelihood of different outcomes based on a set of assumptions and how those assumptions respond to random variables.