Monte Carlo In Retirement

In the textbook, we discussed the use of a Monte Carlo simulation in capital budgeting. A common application of a Monte Carlo simulation is using it to determine the probability a retirement portfolio will last for the duration of an individual's life. However, as the article notes, it may be difficult for the average investor to understand "the odds of success" or recognize the difference between a 50 percent probability of success and a 70 percent probability of success. One point the article makes that we would like to reiterate is that flawed inputs can cause erroneous outputs. In other words, like any other model, the end result is only as accurate as the inputs.