Introduction
Every figure on this page comes from one invented sample household. It was run through the calculator on with 500 simulated futures and the same random seed (seed 42) at every step. It is not your plan and says nothing about your situation.
This guide shows what each setting in the calculator does. It starts with a household that has only the basics filled in and changes one thing at a time. Each step shows the reading before, the reading after, and what stayed the same.
It does not say which setting to use. A step is not an improvement on the one before it.
The household
A single person who stops working at 55 and bridges to Social Security from taxable savings.
How to read the figures
- Today's dollars. Every dollar figure is in today's dollars.
- The single path. One smooth future with average returns. It answers yes or no: does the money last to age 95?
- Avoided running out of money before the end of the simulated lifetimes. The share of simulated futures in which the money lasts for as long as the person lives in that future. A future that ends early counts as a success even if the money would have run out later.
- The money lasts to 95, if the household lives that long. The share of simulated futures in which the money lasts to age 95. This is the stricter reading and it is usually the lower figure.
- Middle (median) ending balance. What is left in investment accounts at the end, in the middle future. The low case (10th percentile) ends at zero in every variant for this household, so it is left out of the tables.
What is already switched on
A household with only the basics filled in is not a bare model. The calculator applies these without being asked:
- Health-insurance and Medicare costs are modeled.
- Discretionary spending follows an age curve: it drifts down through retirement and turns up late in life.
- A late-life care event is included: a fixed cost for a fixed number of years starting at a fixed age.
- Withdrawals are taken across account types in proportion to their balances.
- While someone in the household buys marketplace health insurance before Medicare, withdrawals draw cash and tax-free account money first where they can, to keep income below the level at which the insurance subsidy stops.
- In the Monte Carlo readings, when one person in a couple dies in a simulated future, the survivor's taxes switch to single filing, household spending is scaled down (to three quarters by default), and Social Security pays the survivor benefit. This household is one person, so this one does nothing here.
- In the Monte Carlo readings, simulated futures include occasional large home-repair costs beyond the regular maintenance budget, for a household that owns a home. This household does not own a home, so this one does nothing here.
- Results are shown in today's dollars.
Step 1. Read the single path
The change: none. This is the starting point.
| Reading | Result |
|---|---|
| Does the money last to 95 on the single path? | Yes |
| Ending balance, everything owned, today's dollars | $701,000 |
The single path is one future. It cannot show how often a plan fails.
Step 2. Read the two Monte Carlo readings
The change: none.
| Reading | Result |
|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% |
| The money lasts to 95, if the household lives that long | 67% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 |
The ending figure in step 1 and the middle ending balance here are not the same measure: the single path is measured at age 95 with fixed average returns, while each simulated future is measured when the simulated life in that future ends, with returns drawn from history.
The two chances answer different questions, which is why they differ. Neither one describes any real person.
Step 3. Split spending into essential and discretionary
The change: each expense is marked essential or discretionary. No amount changes.
| Spending a year, today's dollars | Amount |
|---|---|
| Essential | $46,000 |
| Discretionary | $22,000 |
This sample household's file already marks every expense this way, so nothing moves: the readings are the ones in step 2.
What stayed the same: every figure. The split matters later: guardrails adjust only the discretionary part.
Step 4. Change the retirement age
The change: the retirement age moves from 55 to 57. This example works 2 years longer.
| Reading | Before | After |
|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 86% |
| The money lasts to 95, if the household lives that long | 67% | 76% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $2,133,000 |
What stayed the same: spending, accounts, and every other setting.
Step 5. Change the Social Security claim age
The change: the claim age moves from 67 to 70.
| Reading | Before | After |
|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 83% |
| The money lasts to 95, if the household lives that long | 67% | 68% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $1,640,000 |
What stayed the same: the retirement age from step 1 (step 4's change is not carried forward) and every other setting.
Each step from here on starts again from the step 1 household, so each table shows one change and nothing else.
Step 6. Change the order withdrawals are taken in
The change: three orders, one at a time. In proportion to balances (the default); cash and taxable accounts first, then tax-deferred accounts up to a set tax bracket, then tax-free accounts, then the rest of the tax-deferred; and filling a tax bracket each year.
| Reading | In proportion (default) | Cash and taxable first | Filling a bracket |
|---|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 81% | 82% |
| The money lasts to 95, if the household lives that long | 67% | 67% | 67% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $1,807,000 | $1,607,000 |
What stayed the same: spending and everything else. Only the order changes.
Step 7. Switch a default off and on
The change: the fixed late-life care event is switched off. On the single path that removes the cost. In the Monte Carlo readings the calculator replaces it with a care cost that arrives by chance in some futures, so those rows compare a fixed care event with a chance-based one. Then the care event is switched back on and the spending curve is switched off.
The late-life care event
| Reading | Fixed event (default) | Chance-based |
|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 85% |
| The money lasts to 95, if the household lives that long | 67% | 72% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $1,763,000 |
The spending curve
| Reading | Default on | Default off |
|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 80% |
| The money lasts to 95, if the household lives that long | 67% | 66% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $1,622,000 |
What stayed the same: every other setting.
This shows how much of a result comes from a default. Both defaults are back on for the steps that follow.
Step 8. Switch guardrails on
The change: guardrails are switched on. When a simulated future goes badly, discretionary spending is cut by a set share; when it goes well, it is raised. Essential spending is not touched.
| Reading | Before | After |
|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 82% | 85% |
| The money lasts to 95, if the household lives that long | 67% | 74% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,649,000 | $1,718,000 |
What stayed the same: the single path. Guardrails act in the Monte Carlo readings only, so the answer in step 1 does not change. The calculator says so when it returns the single path.
With guardrails on, a future counts as a success when spending was cut to make the money last. The chance rises because spending fell in the futures that went badly, not because the plan became safer at the original spending.
Step 9. Add a spending floor, then a ceiling
The change: a floor is the lowest yearly spending a guardrail cut may reach. A ceiling is the highest yearly spending a guardrail raise may reach. Here the floor is $66,000 a year, then a ceiling of $79,000 a year is added, with guardrails still on. Both are chosen for illustration, relative to this household's discretionary spending; the floor is the lowest tried that changes a figure.
| Reading | Guardrails only | With the floor | Floor and ceiling |
|---|---|---|---|
| Avoided running out of money before the end of the simulated lifetimes | 85% | 85% | 85% |
| The money lasts to 95, if the household lives that long | 74% | 74% | 74% |
| Middle (median) ending balance, investment accounts, today's dollars | $1,718,000 | $1,707,000 | $1,747,000 |
A floor limits how far spending is cut, and a ceiling limits how far it is raised. For this household, at these figures, the chances do not move at whole percents. The middle ending balance is a little lower with the floor and higher once the ceiling is added.
What stayed the same: the single path, as in step 8.
The figures for a floor and a ceiling come from the person using the calculator. The assistant asks for them and does not propose them.
Step 10. Put the variants side by side
The change: none. The household from step 1 and the variants from steps 4, 5 and 6 are set side by side on the single path.
| Plan | What differs | Does the money last to 95? | Ending balance, everything owned, today's dollars |
|---|---|---|---|
| Step 1 household | Nothing: the starting point | Yes | $701,000 |
| Step 4 variant | Retires at 57 in place of 55 | Yes | $1,329,000 |
| Step 5 variant | Claims Social Security at 70 in place of 67 | Yes | $802,000 |
| Step 6 variant | Cash and taxable accounts first | Yes | $811,000 |
| Step 6 variant | Filling a tax bracket each year | Yes | $711,000 |
This table shows the single path only. It has no chance figures, and plans that differ only in guardrails, the floor or the ceiling look identical in it.
What this guide leaves out
Rental property, stock-based pay, annuities, insurance, inherited accounts, dependents, trusts and business income are outside this guide. The known limits page lists what the calculator does not model.
Using your own figures
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