IFA > Calculator > Monte Carlo Simulation

Retirement Analysis
Utilizing Monte Carlo Simulation


This report is offered as a tool for helping investors understand key factors in retirement investing. It is offered to clients and prospective clients of IFA and its Network Members with initial investable assets of $100,000 or more. The charts and graphs produced from the information provided by you in the form below will be based on the Monte Carlo simulation method. This method simulates 10,000 portfolio outcomes an investor may experience based on 83 year or 50 year historical risk and return data starting from one of 100 IFA Index Portfolios, with a Glide Path option. The scenarios are presented in terms of statistical probabilities of portfolio survival at various ages of your retirement. The inputs include your age and time horizon, initial wealth, periods of savings and withdrawals, investment risk level based on your Risk Capacity Survey results or your age, an option for a Glide Path and a choice of whether to include or exclude the Great Depression in the historical risk and return assumptions of annualized return and standard deviation. This report is based on many assumptions which can make large changes in the outcomes and in no way can cover all the changes that occur throughout a lifetime. Your PDF report download link will be provided immediately and at no obligation. If your investment advisor is not associated with IFA and is using the IFA report without a license, you should be very concerned about their ethics.
Click here for an example of the report.




 

Monte Carlo Simulation Request Form

1. What is your current age?
2. Are you currently retired? Yes No
3. What is your current annual household gross income? $
4. Estimate the average increase in your annual salary during the years of your employment? A common annual increase would be between 3% and 6%. %
Comment or question:
5. Estimate the percent of your current annual household gross income you plan to contribute to retirement in years of employment. A typical annual contribution percentage would be between 5% and 15%. %
Comments or questions:
6. Most employees expect to retire at 67 years old. What age do you plan to retire?
7. The standard method of determining safe withdrawals rates during retirement is to take a percentage of your initial retirement portfolio, then adjust that dollar amount for inflation throughout your retirement. IFA also assumes that you will pay your taxes from those withdrawals, and that social security and other sources of income will be in addition to these withdrawals. As of 2011, the maximum social security benefit is $28,392/year. We suggest 4.5% of your portfolio at retirement. Would you like to see what dollar withdrawals that would provide you?
Yes
No, I want % of my portfolio at retirement.
No, I would like to specify my dollar withdrawal rate at retirement

Comments or questions:
8. Most retirees plan to withdraw from their savings for 25 to 30 years from the date of their retirement. How many years do you plan to withdraw from your savings? Years
Comments or questions:
9. What is the current value of your retirement savings? $
10. If you took the Risk Capacity Survey at ifa.com, what Index Portfolio did it recommend at the end of the survey? If you did not take the risk capacity survey, enter 0.
Index Portfolio Number
11. IFA needs to estimate the expected return and risk (standard deviation) of your Index Portfolio. Would you like IFA to use the 83 year data, which includes the Great Depression? If you choose no, IFA will make its estimates of risk and return based on the last 50 years, which does not include the Great Depression.
Yes No
Comments or questions:
12. It is not realistic to assume investors will keep their investments at the same risk level throughout their investing lifetime. Therefore, IFA advises its clients to put their Index Portfolios on a Glide Path, which reduces the Index Portfolio by one number per year, which is a 1% reduction in the equity allocation per year. Would you like IFA to assume you are on the Glide Path?
Yes No
Comments or questions:
13. What kind of investor are you?
You invest in actively managed mutual funds without a passive advisor.
You invest in index funds without a passive advisor.
You invest in index funds with a passive advisor.
Other. Please summarize your investment strategy in the comments box below

Comments or questions:

 

 

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WARNING: Past performance does not guarantee future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Investing in any mutual fund, index or actively managed, does not guarantee that an investor will make money, avoid losing capital, or indicate that the investment is risk-free. Actively managed funds sometimes outperform index funds. You just don't know in advance which actively managed fund will outperform the appropriate index. Just because a mutual fund is an index mutual fund, it does not guarantee a performance superior to an actively managed mutual fund. There are no absolute guarantees in investing. When reviewing any backtested performance information on this internet site, please read the Disclosure for Backtested Performance Information (click here to read the Disclosure for Backtested Performance Information.) For a copy of the Index Funds Advisors, Inc. Privacy Policy, click here.

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