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The Short Answer

Monte Carlo's Role in Retirement Planning

This statistical method is designed to help improve your odds of meeting your financial goals but is not without its flaws.

Question: I've seen some online retirement calculators mention that they use a Monte Carlo simulation. What is that?

Answer: A Monte Carlo simulation might sound like a ride you'd find at Disneyworld, but it's actually a statistical method used to determine probability and assess risk. At its most basic, a Monte Carlo simulation allows the user to determine the likelihood of different outcomes based on a set of assumptions and how those assumptions respond to random variables.

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