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Monte Carlo FIRE: Does Your Plan Hold in 9 Out of 10 Markets?

1,000 to 10,000 simulated markets, one success rate, three scenarios (P10, P50, P90). In 5 minutes, you know whether your plan holds.

Intermediate

10 min

Masterclass

Monte Carlo in 30 seconds: the dice metaphor

Roll a die 10,000 times: you discover the real probability of each face. Monte Carlo applies that logic to your FIRE plan. Each roll is a full 30-year market scenario. After 10,000 rolls, you have your success rate.

Why Monte Carlo crushes the flat 7% projection

No market returns 7% every year. It returns +30% one year, −20% the next, sometimes −40% two years in a row. A smooth projection tells you 'FIRE at 52.' Monte Carlo tells you 'FIRE at 52 in 88% of cases, at 58 in the worst 10%.' Those two sentences do not lead to the same decision.

How Monte Carlo tests your plan, step by step

Draw a sequence of annual returns, calibrated on the historical averages and volatility of your allocation.
Compute your wealth year by year for that sequence.
Repeat 1,000 to 10,000 times, with a different sequence each round.
Read the results: success rate, P10 (the worst 10% of draws), P50 (median), P90 (the best 10%).

The 4 traps that distort your Monte Carlo reading

Confusing success with a guarantee. 95% success means 1 plan in 20 ends at zero. Not a certainty.
Reading the success rate without looking at the P10. A 92% success rate with a P10 of $200,000 at the end of retirement is still aggressive if your non-negotiable expenses are $25,000 a year.
Plugging in overly optimistic assumptions. 9% real returns, 1.5% inflation: you manufacture a flattering success rate on numbers no one has held for 30 years.
Not rerunning after a life change. A child, a move, a rent hike: your expenses shift by 20%, and so does your success rate.

Key Takeaways

1Monte Carlo is 1,000 to 10,000 simulated markets, not a prediction. You get a probability, not a future.
290% success = your plan holds in 9 draws out of
3Below 80%, rethink; between 80 and 90%, keep an eye on it.
4P10, P50, P90, to read together. The success rate alone hides the worst trajectories.
51,000 simulations to iterate, 10,000 for the final decision. Beyond that, the gain becomes marginal.

Read your results in 4 numbers

P10 (pessimistic). 10% of draws do worse. Capital to watch: if your P10 sits below your non-negotiable expenses, the plan is fragile. P50 (median). The central draw. 50% do better, 50% do worse. Never reason on this line alone. P90 (optimistic). 10% of draws do better. Useful for framing a Fat FIRE goal, not for deciding to quit your job. Success rate. Share of draws where your capital does not hit zero before the end. Above 90%: robust. 80 to 90%: keep an eye on it. Below 80%: rethink.