Financial planning by definition entails a wide variety of unknowns, and it's important to account for this inevitability when building a reliable plan. One significant unknown is the uncertainty of future returns.
What you may want to take into consideration
Boldin’s modeling and analysis does not depend upon how each individual holding performs. We do not yet capture cost basis, allocations, or transactions and you will need to make those entries yourself to ensure that your plan is accurate. You have the ability to model your asset allocation (which is the percentage of equities and fixed income you have in each account) by selecting a rates of return for each account.
Enter nominal rates, do not adjust for inflation.
The higher the optimistic rate of return, the more variability you’ll see in the Monte Carlo and vice versa.
Setting Rates of Return
A common approach is to use the historical return as a reference.
You may want to use Portfolio Visualizer's Monte Carlo Simulation as a guide. For example, may want to utilize the 50th percentile values for your optimistic rate of return and 10th percentile values (considered the worst case scenario) for your pessimistic rate of return.
Overly optimistic assumptions may lead to negative outcomes such as an unexpected shortfall or lack of funding for long-term care. Overly pessimistic assumptions may create a variety of other issues such as restricting your spending and lifestyle in retirement, experiencing a higher than anticipated tax liability, and facing Medicare premium surcharges.