Smarter Monte Carlo
Old-school Monte Carlo, used in conventional financial planning, is deeply flawed.
First, it uses an outdated, extremely rough “rule of thumb” to set a post-retirement annual spending target. This approach is sure to miss the mark, potentially by a huge margin. Second, it calculates the probability of plan success — the chance you can spend this exact amount year after year and not go broke.
This makes aggressive investing — including in managed funds with high fees — look good because riskier, but higher yield plans have a smaller chance of failure.
But blindly spending the wrong amount year after year, regardless of how your investments perform, and using the wrong spending target makes no sense. Worse, this strategy raises the chances of going broke early in retirement with far too many years left to finance.
MaxiFi takes a smarter approach.