Detailed Instructions: Portfolio Wealth Simulator

Why use this calculator?

To understand the range of possible future portfolio outcomes ("cone of uncertainty") due to market volatility and the specific order of investment returns. It demonstrates how "unlucky" timing (early losses) can severely impact a portfolio even if the average return is good. (Note: Simulations use inflation-adjusted "Real Dollars")

How to use it

Retirement: In Retirement Mode, you start with a nest egg and withdraw funds annually. The simulation shows how market volatility ("sequence of returns") can deplete your portfolio faster than expected, even with decent average returns. Note that this is a fixed withdrawal rate strategy; use the Safe Withdrawal Rate Calculator for variable withdrawal rate strategies.

Savings: In Savings Mode, you start with a balance (often 0) and contribute annually. The simulation shows the wide range of potential portfolio values you might end up with after N years, depending on market timing.

Select a Mode (Retirement or Savings). Enter your Initial Balance, assumed Return/Volatility parameters, and either a Withdrawal Rate (Retirement) or Annual Contribution + Growth (Savings).

Example Inputs

Try these inputs to interpret the results correctly:

Retirement Mode

Parameter	Example Value	Description
Initial Balance	$1,000,000	Starting portfolio value.
Real Return	5.8%	Average annual return (inflation-adjusted).
Stdev	6.1%	Annual standard deviation (volatility).
Safe Withdrawal Rate	5.0%	Percentage of initial portfolio withdrawn annually.
Annual Expense	0.0%	Annual percentage fee or expense ratio deducted from the portfolio.
Duration	30 Years	Length of the simulation in years.

Savings Mode

Parameter	Example Value	Description
Initial Balance	$0	Starting portfolio value.
Real Return	7.0%	Average annual return (inflation-adjusted).
Stdev	17.0%	Annual standard deviation (volatility).
Annual Savings	$12,000	Base annual contribution amount.
Annual Savings Growth	3.0%	Annual percentage increase in savings contributions.
Annual Expense	1.0%	Annual percentage fee or expense ratio deducted from the portfolio.
Duration	30 Years	Length of the simulation in years.

Common Values

Standard return and volatility assumptions used in many examples:

Portfolio Type	Real Return	Standard Deviation
50/50 Portfolio (Stocks/Bonds)	5.8%	6.1%
100% Stocks (S&P 500)	7.0%	17.0%

Note on Real vs. Nominal Dollars: Simulations use "Real Dollars" (inflation-adjusted). This means a 0% return maintains purchasing power, while positive returns approximate growth above inflation.