Run an AI-Enabled Stress Test
Straight-line projections assume a steady average return, like 6% annually, without accounting for the market’s natural ups and downs. In reality, returns vary annually, and the sequence of those returns, especially early in retirement, can significantly affect how long a portfolio lasts.
IW Retirement Planner addresses this risk through advanced stress testing, powered by Monte Carlo simulations and AI trained on over 55 years of historical market data. Each stress test generates a 1,000 unique retirement scenarios that reflect more realistic market volatility, incorporating fluctuations in investment returns, inflation, and other risks, including severe market downturns. The result is a more rigorous evaluation of whether your plan can adapt to uncertainty while still supporting your retirement income goals.
To perform a Monte Carlo stress test, simply activate the
AI-Enabled Stress Test switch and run a simulation to evaluate the risk level of your straight-line plan. Results can be reviewed through interactive charts and a summary that includes your plan's Probability of Success score, representing the percentage of scenarios where your funds lasted throughout your full retirement.
Monte Carlo stress test Probability of Success score
Interpreting Your Stress Test Score
Your financial goals and retirement lifestyle preferences play an important role in understanding your Probability of Success score. For those with modest retirement goals and flexibility in their spending, an 85% success rate can suggest a reasonably sound retirement plan. However, if you have ambitious goals or wish to maintain a higher standard of living in retirement, aiming for 90% or above provides a larger financial cushion and greater peace of mind.
Additional reading: Goldilocks and the "Just Right" Probability of Retirement-Planning Success