Calculator
Monte Carlo Portfolio Simulator
Monte Carlo Simulation Calculator
Median Ending Balance
$801,777.32
Simulation Analysis
In 300 simulated market paths, your $100,000 plus $6,000 of annual contributions has a 10% chance of ending below $391,501.2, a 50/50 shot at landing near $801,777.32, and a 10% chance of reaching $1,686,051.69 or better after 25 years. The spread between those outcomes is market volatility at work — the average result is only the middle of a wide range, not a promise.
*Simulated outcomes assume lognormally distributed annual returns with a constant mean and volatility. Real markets are messier, and past distributions do not guarantee future results. This tool is educational only, not financial advice.
Why a Single Forecast Is Not a Plan
Every compound-interest calculator hands you one number: grow $200,000 at 7.5% for 20 years and you get a tidy figure to pin your retirement on. But the ASX does not hand out fixed annual returns. The real path wanders — some years up 20%, some years down 30% like March 2020 or the 2008 GFC drawdown — and a single forecast hides exactly the risk you need to manage. A Monte Carlo simulation replaces that single number with hundreds of plausible market histories, each drawn from the same average return and volatility you expect, and reports the full range of where you could actually land. For Australian investors this matters because the two biggest financial decisions of a lifetime — how much to shovel into super and property while working, and how fast to draw an account-based pension in retirement — hinge on tail outcomes, not averages. The classic research behind the 4% rule was built on exactly this idea: test a withdrawal plan against thousands of market sequences and require it to survive nearly all of them. Sequence matters too: a crash in year two of retirement, when every pension payment sells shares at the bottom, hurts far more than the same crash in year twenty of accumulation. The technique has trickled down from pension consultants to free web tools, and it has become the standard sanity check before committing to any retirement income plan, FIRE target, or big savings goal. Run your own numbers here: set a starting balance, contributions or withdrawals, an expected return matched to your actual mix of ASX shares, global ETFs, bonds and term deposits, and an honest volatility figure — then see whether your plan survives the unlucky paths as well as the average one.
Rolling the Dice 300 Times
Each simulated year the calculator draws one random return from a normal distribution centred on your expected annual return with your chosen volatility, converts it into compounded growth via exp(μ − σ²/2 + σz) — the standard lognormal price model used across finance — applies it to the balance, adds your annual contributions, and subtracts any withdrawal. This repeats for the full horizon, and the whole history is replayed 300 times with fresh random draws. From the 300 ending balances the tool reads off the percentiles: the median (50th) is the middle-of-the-road outcome, the 10th percentile is the unlucky-but-plausible one, and the 90th is the lucky one. For withdrawal plans it also counts how many of the 300 paths still had money at the end — that survival share is the probability your plan lasts. The −σ²/2 term in the drift matters more than it looks: it keeps the median of many compounded random paths consistent with your stated expected return instead of quietly inflating it, which is why volatility shrinks your compounded outcome even when the average return looks healthy. Every run uses a seeded pseudo-random generator, so results are reproducible for a given seed, and the Re-run button draws a fresh batch so you can watch how much the percentiles themselves wobble — that wobble is honest information about how precisely anyone can predict markets.
Expert Insights
Volatility Shrinks Your Compounded Return
A portfolio averaging 8% with 16% volatility compounds closer to 7% per dollar over time, because deep drawdowns need disproportionate gains just to get back to even — the arithmetic of losing 40% and needing 67% to recover. The wider the volatility you assume, the further the median drifts below the headline average. When stress-testing a plan, raising the volatility input by five points is often more honest than cutting the expected return.
Sequence Risk Only Hurts Once You Start Spending
While accumulating, a bad early year is nearly free — your regular ETF purchases simply buy cheaper units and recover with time. The moment account-based pension payments begin, the same bad year becomes permanent damage, because each fortnightly drawdown sells units at depressed prices that can never recover. That asymmetry is why the simulator reports survival probability separately from ending balances, and why retirees hold a cash buffer of two to three years of payments outside growth assets.
Calibrate Inputs to Your Actual Mix, Not a Fantasy
Long-run Australian equity history suggests roughly 9-10% nominal with about 17% volatility; a balanced 70/30 growth mix closer to 7-8% with 11-13%; a conservative pre-retirement blend 5-6% with 6-8%. Plugging 12% returns and 5% volatility into a simulator produces reassuring output that says nothing about any real portfolio. Start from your actual super option or ETF allocation, use returns net of the 0.1-1% you pay in fees, and adjust from there.
Actionable Tips
- 1
Plan on the 10th Percentile, Not the Median
Treat the median outcome as the ceiling of your base case and the 10th percentile as its floor. If the plan fails on the unlucky path — the pension runs dry early or the target is missed — add contributions, trim withdrawals, or shift the asset mix until it survives there too. Plans that only work on the median line are coin flips wearing a spreadsheet.
- 2
Aim for 90%+ Survival on Drawdown Plans
Retirement planning literature treats roughly 90-95% survival across simulated histories as the safety bar for an account-based pension. Below 80% you are effectively betting your later years that Australia avoids another GFC-style sequence early in retirement. Remember the Age Pension acts as a partial backstop if assets run low, but means testing means relying on it is a plan change, not a rounding error.
- 3
Re-run After Every Big Life Change
A raise, a redundancy, a market rally, a new contribution cap, or moving from accumulation to pension phase all move your odds. Re-run the simulation at least yearly and after any change bigger than 10% in balance, contribution, or withdrawal — the numbers that justified last year's plan can drift quietly without it, and the fix is cheapest while you can still act on it.
Real-World Examples
Maya's Retirement Wake-Up Call
Maya, 54, assumed her $450,000 in super would grow straight-line at 7% and comfortably fund $35,000-a-year drawings from 62. A deterministic spreadsheet agreed. But the simulator showed that with 15% volatility the 10th percentile ran dry at 73 — eleven years short. She lifted her salary sacrifice by $400 a month and delayed retirement by eighteen months, pushing survival above 92% and giving her a plan she could actually trust.
The FIRE Couple's Margin Test
Jordan and Sam quit their Melbourne jobs at 38 with $1.3 million and wanted to spend $52,000 a year — almost exactly 4%. Across 300 paths over 45 years, the plan survived 89% of the time, but the 10th percentile was exhausted by 71. They kept the 4% draw yet wrote a guardrail rule: cut spending 10% in any year the portfolio fell 25%. Backtesting against the simulator showed that rule would have rescued nearly all the failing paths.
A Realistic Target for a Young Saver
Chris, 28, wanted to know whether $600 a month into his industry fund could realistically reach $1 million by 55. The deterministic answer said $520,000. Across 300 simulated histories, hitting $1 million required landing in roughly the top 5% of outcomes — luck, not strategy. He doubled contributions to hit the median target and stopped reading forums promising otherwise; the percentile view made the trade-off impossible to unsee.
Glossary of Terms
- Monte Carlo Simulation
- A modelling technique that replays hundreds of randomized market histories sharing the same average return and volatility, reporting the distribution of outcomes instead of a single forecast.
- Percentile
- A rank within the sorted list of outcomes — the 10th percentile is the result only 10% of simulated paths fell below; the 50th (median) is the middle outcome.
- Sequence-of-Returns Risk
- The danger that poor returns arrive early in retirement, when withdrawals lock in losses by selling assets before markets recover.
- Volatility
- The standard deviation of annual returns around the average — a statistical measure of how violently a portfolio swings year to year.
Frequently Asked Questions
Everything you need to know about this topic.
Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.