I like how it includes mortality risk and not just longevity risk 
you are fucking awesome… math might be a little off. there have to be some chance of going bust at a 3% withdrawal rate from inception
I thought it was a bit conservative actually, as 4% withdrawal rate results in like 25% failure over 30 years.
see thats my problem with the math. these are his numbers assuming 100% stock, no tax, no investment fees, retire at 20, live at 100:
4% withdrawal rate is 18% chance of bust
3%, 0%
my numbers on the other hand, using same assumptions and expenses rising with inflation, with market returns i used from shiller data, i did 10k simulations.
at 4% withdrawal, bust rate should be 32%.
at 3% withdrawal, 20%
at 2%, 8%
at 1%, 1%
to be 100% certain, you’d literally have a withdrawal rate of 0.3%
crazy i know. but monte carlo is just using std and averages and it isnt taking into account sequential probabailities where if prices drop that the odds of dropping further goes down.
its important to note, that the worst drop from peak to trough for the us stock market is about an 82% drop from 1929 to 1932. so it’s fairly easy to imagine going bust with 3% withdrawal rate. since if you had a theoretical 100 buck portfolio. you’d have 18 bucks after first year withdrawing 3$ or a withdrewawal rate of 16%.
From the website, below. Obviously this will be far different from a monte carlo analysis (which itself is dependent on the average return and vol inputs).
Anyway, a substantial portion of the difference is because it is taking into account mortality risk. If you have a 40% chance of being dead you have a lower chance of being broke… 
. And unfortunately, on a long enough timeline you have 100% probability of being dead. You can toggle off the “Dead” field and I’m sure the “Broke” probability will rise.
Probabilities based on historical cycles
The graph shows the likelihood of your balance being at different levels during each year of your retirement (and compares it to the probability of dying during this time). Red indicates failure (i.e. you’ve run out of money) and green indicates success (i.e. you haven’t run out of money). The probabilities are calculated based upon looking at stock, bond and cash returns from historical cycles between 1871 and 2016. If you expect to retire for 50 years, one historical cycle would be from 1871 to 1922, another one from 1872 to 1923, and so on until 1965 to 2016. Thus 95 different historical cycles are considered (in this case). It is important to note that these frequencies in the past are not the same as actual probabilities. Just because an outcome happened once in history doesn’t mean that there is a one in 95 chance (1.05%) of this same thing happening in the future. However, if your retirement portfolio survives most historical cycles, there is a good chance that it’ll survive in the future without any major black swan events. If something crazy occurs (e.g. a major nuclear war), your retirement balance may be the least of your worries, so we can safely ignore this, since there’s very little way to prepare for it financially. If you look over all these historical cycles, we find that a 4% withdrawal rate will generally last through a long retirement, though there are occasional cycles that are “failures”, i.e. you run out of money.
haha. ur right i didnt think about that.
you can actually argue that you have a higher chance of being dead if ur broke. i guess that is still called a success.
https://sites.google.com/site/cfalevel3examprep/working-with-investors/ss5/reading-12/13e
i still remmeber this guys website talking about different types of risk. hilarious stuff.
So, there’s a risk that I might die to early and there’s a risk that I might not die soon enough?
- Yes, so just make sure to die when you’re supposed to.
Damn, i’m going to need a lot more money than i have right now
What is this?! I thought everyone around these hoods were so well off that going MC on pension portfolios was considered peasantry.