Transcript:
What does it mean when a financial advisor says your retirement has a 70% chance of success? Why not 100%? After all, you don't want to leave your retirement as a chance, right? Hi, I'm Hunter Brockway, founder of Boca Retirement Strategies. I'm here to help you retire successfully, stress-free, spending more, saving on taxes, and avoiding running out of money. Today I'm breaking down a common tool used in retirement planning, the Monte Carlo Calculator. I'll explain what it is, how it works, and why it's only part of the picture when it comes to achieving your goals. A Monte Carlo Calculator is a tool that financial advisors use to project your retirement plan's probability of success. Here's how it works. After entering your financial data into a planning software, the Monte Carlo tool runs a thousand or more scenarios. These scenarios simulate different market conditions like bad markets, great markets, or something in between, and project your outcomes in each. Some scenarios leave you with tens of millions of dollars. Other scenarios leave you broken, dependent on others. The calculator then takes the average outcome and gives you a probability of success. For example, if your plan has a 70% probability of success, that means in 70% of the scenarios, you'll have enough money, but that also means that there's a 30% chance your retirement will implode and you'll have to go live with the kids. Or if you reframe it properly, a 30% chance you'll need to adjust your spending, investments, or other factors during retirement. This percentage can be helpful, but let me make one thing clear. A Monte Carlo result is not a financial plan. Here's the issue. A Monte Carlo calculator shows you probabilities, not solutions. If all you're getting from your financial advisor is a percentage printed on a page, then you're missing out on actual financial strategies to achieve your goals. Plus, Monte Carlo doesn't account for the things that are within your control and those that are things that matter the most. So what can you not control? Market returns? The economy? What are some things you can control? Portfolio distributions? How much and when you withdraw for your investments? Social security claiming strategies? Claiming your benefits to maximize your income? Retirement income alignment helps ensure that all income sources cover your basic expenses or what I call your bare minimum dignity floor, tax strategies, leveraging tax brackets, minimizing Medicare IRMA surcharges and planning for estate taxes, investment selection, choosing the investments that align with your risk tolerance and goals, estate planning strategies, ensuring your legacy is protected and taxes are minimized, building a financial war chest, setting aside funds for emergencies and opportunities. The Monte Carlo Calculator can't adjust for these strategies or even address unexpected life events like buying an RV, paying for a wedding or adjusting spending patterns over a lifetime. That's why you need a real plan, not just a probability. So how do we track a successful retirement? At Boca Retirement Strategies, we take a comprehensive approach. First we start with your goals. What does a successful retirement look like for you? Next we build a retirement income plan that covers your basic expenses, your bare minimum dignity floor, creates spending flexibility with guardrails so you can adjust without fear of running out of money. taxes, social security, risk management, and estate planning. With this approach you're not relying on an abstract percentage. Instead you're using actionable strategies to stay on track no matter what life throws at you. Here's the bottom line. A Monte Carlo calculator is a great tool for seeing probabilities, but it's just one piece of the puzzle. The real key to retirement success is creating a blueprint that aligns with your goals, includes things you can control, provides flexibility to adapt to life's changes. Don't settle for a plan that only gives you probabilities. Take control of your retirement with actionable strategies. If you have any financial questions you can send them to contact at BocaRetirement.com. Bye.
