Step-by-step Instructions

1. Read the Terms and Conditions for important disclosures.
2. Download the Monte Carlo Retirement Calculator and save it to your local hard drive.
3. Run the program by double clicking on RetirementCalculator.jar. If your computer does not recognize the .jar extension as an executable, you need to install the Java Runtime Environment. Please see the FAQs for more information.
4. Parameters: Enter your age and your approximate effective tax rate (this will be used to calculate your after tax income). The 'Time Horizon' field specifies how many years into the future you want the projection to run. The 'Number of iterations' is the number of scenarios to simulate. This generally has to be at least 200 to get usable results. Lower numbers mean less computation time. Finally, you need to specify the inflation rate to be used to adjust your earnings and expenses. The default value corresponds to the average inflation rate for the period of 1974 to 2004.
5. Cash Flows: The table at the bottom shows two sample cash flows. Remove those by clicking on them and then clicking the 'Clear' button. Then enter your incomes and expenses. The pulldown menu for the descriptions lists a few typical examples, but you can type in any description. Specify either the monthly or the annual amount and indicate if the cash flow is income or expense. If this cash flow is expected to start and/or end on a specific date, enter the corresponding year in the 'Start Year' and 'End Year' fields. If you leave these fields blank, the Retirement Calculator will assume that the cash flow starts in the current year and continues in perpetuity. Finally you can indicate that a cash flow is tax exempt in which case your effective tax rate will not be applied to it. The last check box allows you to indicate that a cash flow is not subject to inflation (e.g. income from an annuity, an insurance premium that is fixed for life, etc).
6. Assets: Enter a description of each of your assets. Indicate which type of asset it is and whether it is a retirement asset. The Monte Carlo Retirement Calculator treats real estate assets in the different census regions separately, because the historical price evolution shows drastic regional differences.
7. Liabilities: For each of your liabilities enter a description, your monthly payment, the APR and the current balance. For adjustable rate loans enter your best estimate of the average APR and monthly payment. The 'End Year' field only applies to interest only loans and should be left blank for other loans. The Retirement Calculator will calculate the loan balance based on the interest rate and the monthly payment.
8. Calculate: The 'Calculate' button on the 'Parameters' tab launches the actual simulation. Alternatively you can start the calculation using the 'Actions' pulldown menu. Depending on your system this can take several minutes to run. You can interrupt the calculation with the 'Stop' button.
9. Results: Once the calculation is finished, the results tab contains a summary of possible outcomes. The first column shows the year; the second column shows your net cash flow for that year. This cash flow includes all your earnings adjusted for inflation and taxation, all your expenses adjusted for inflation, your loan payments, and all Required Minimum Distributions from retirement assets. It does not include investment income. The liability column shows your total liabilities over time. The five asset columns map out the range of outcomes. The first column shows an outcome such that there is a 5% probability of a worse outcome. The next column shows the level of assets such that 20% of the outcomes are worse. The middle column is the expected case, i.e., half of the outcomes are better and the other half are worse. The last two columns show an outcome such than only 20% and 5% respectively of all outcomes are better.
10. Save your inputs: The File menu at the top provides functions to save and load the data you entered. To save your inputs, click on File and select 'Save Personal Data.' This will pop up a save dialog. Select a file name and a location for the file and click 'Save.' Your data will be saved in the directory you selected as a .prc file. You can now close the Retirement Calculator.
11. Loading your inputs: You can reimport your data by going to the File menu and clicking on 'Load Personal Data.' The dialog will guide you through selecting an appropriate file. Click 'Load' to import your data. The tabs should now show the information you saved previously.