Will your money last in retirement?

What does a Monte Carlo retirement calculator actually do?

Most retirement calculators take one fixed growth rate — say 5% — and tell you "you'll have £620,000 at 67." That number is a fantasy because markets don't deliver 5% every year. Some years they're up 25%, some they're down 30%. The order those returns arrive matters enormously, especially in retirement when you're drawing down. A crash in your first two years of retirement can drain a pot that the same average return would have left untouched if it had crashed ten years later.

A Monte Carlo simulation takes your plan and replays it five thousand times. Each replay uses a different random sequence of yearly returns drawn from a statistical (log-normal) model with a set average and volatility (5% and 12% a year here). Then it counts: in how many of those 5,000 replays did your money last to age 95? If the answer is 4,100, that's an 82% chance of success. It's the difference between "your pension statement says you'll have £620k" (one made-up future) and "across 5,000 plausible futures, the median is £620k, the worst case is £180k, the best case is £2.4M, and 82% of them leave you okay."

How to read the result

The big number is the percentage of simulated futures where your pot lasted to age 95. At 82%, 18 in every 100 simulated futures ran out of money first; at 50%, half did. A figure near 100% means almost every simulated future ended with money left, often a good deal of it.

The fan chart shows the spread of outcomes year by year. The bold green line is the median: half of futures landed above it, half below. The darker green band covers the middle 50% (the "likely" range). The lighter outer band shows the full 10th–90th percentile spread — what the worst-case 1-in-10 and best-case 1-in-10 futures look like. If the lower edge of the chart bottoms out before your target age, that's where your worst-case retirement runs out.

What this simulator captures — and what it doesn't

It captures: sequence-of-returns risk (the order of returns), volatility (year-to-year swings), UK income tax on drawdown (Personal Allowance, basic and higher rate), the 25% SIPP tax-free portion, and State Pension if you tick the box. Returns are sampled from a log-normal distribution with a 5% mean real return and 12% volatility. That is closer to a balanced fund; an all-equity portfolio swings more (around 17% a year). All figures are in today's pounds (real terms), so you don't have to mentally adjust for inflation.

It does not capture: Scottish rates, HICBC, Marriage Allowance, dividend allowances, partner pensions, multiple separate pots with different drawdown ages, BTL rental income, top-slicing relief, or the personal allowance taper above £100k. The full WealthR app brings in partner pensions, separate pots and rental income from your real data, but its simulation uses the same simple allowance and 20%/40% bands; Scottish bands, HICBC and Marriage Allowance are handled separately in its Tax tab.

This is a planning aid, not regulated financial advice. See the full methodology for the underlying maths and assumptions.

Frequently asked questions