OK, based on some of the comments I should elaborate a bit. There really are two big considerations in a retirement calculator: how long you will live, and how your portfolio will evolve over time. All of the retirement calculators that I'm aware of focus on the probability distribution of the second consideration and ignore the probability distribution of the first. This seems like a mistake to me.
Here's an example (a bit contrived but illustrative): suppose you are 60 years, and you withdraw 4% of the initial value of your portfolio per year, and, to keep things simple, the returns on your portfolio are exactly the same as inflation. After 25 years, you will be out of money. If you run this through a calculator, and you use 25 years as the time period for the calculator, it will come up with a 100% chance of failing. But say the mortality tables tell you that have a 40% chance of living to be 85 years or older. Then a better guess at the chance of running out of money is 40%, not 100%, since you have a 60% chance of dying before your portfolio is exhausted.
I believe that you would calculate this by running your retirement calculator for the maximum number of years from your age to the end of the mortality table (about 100 years old) and instead of counting up all of the failures and dividing by the number of simulations to get the failure rate, you would weight each failure by the probability of surviving to the age of the failure and then divide by the number of simulations. Does that sound correct?
It sounds like a reasonable approach to a problem that is different from the one we retirees are trying to solve. The weighting you are talking about is going to be influenced more by averages since they are very much more likely. But that's not my problem. I am an "n" of one. My problem is how to fund my living if I hit the long odds and still have expenses to pay at age 95. So only the worst case, or let's say the likely worst case, is of interest to me. If I do find myself surprised to be above ground at age 95 and, by the way, broke, it will not be of much consolation to me how unlikely that outcome was.
Similarly, using my previous example of fire insurance on the home, the likelihood of a fire is known to be quite low. No one in my acquaintance has ever experienced his house burning down. Yet, most homeowners buy first insurance because they would face ruin otherwise if the very low probability event did occur. So, homeowner's provide for the worst case scenario. If they used a weighting by average outcomes they could just forget about fire insurance altogether.
So, the problem we face is how to provide for the worst case, not what my portfolio is likely to be worth the day I die.
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