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Monte Carlo – Miscellaneous Assumptions

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Many advisors use Monte Carlo in Goal Planner, Decision Center, and reports to show a client their plan’s probability of success. However, you may not realize how a couple of options under your client’s Advanced Facts > Miscellaneous Assumptions can impact a client’s Monte Carlo results.

Today, let’s look at:

  • Monte Carlo Affects Mortality
  • Minimum Asset Level for Solving Purposes

Monte Carlo Affects Mortality

Located in the Retirement & Death tab under a client’s Miscellaneous AssumptionsMonte Carlo Affects Mortality indicates whether the system will randomize a client’s life expectancy when performing a Monte Carlo simulation. There is the option to enable this for both client and spouse.

The system defaults to No, assuming with every Monte Carlo trial both the client and spouse will pass at their life expectancy age entered in the Retirement & Deathassumptions. By changing to Yes, we’ll use a mortality table to determine a random year of death. This will range between the current year and maximum age of 109.

Monte Carlo Affects Mortality will impact the results in the Monte Carlo Summary report and Monte Carlo in Decision Center. It will not impact Goal Planner.

Pro tip: If you notice Monte Carlo results are different in Goal Planner and Decision Center, check to see if Monte Carlo Affect Mortality is set to Yes in your Miscellaneous Assumptions.

Minimum Asset Level for Solving Purposes

Located in the Simulation tab under a client’s Miscellaneous Assumptions, you can set the minimum level of assets to be used in some reports. This field also changes the floor amount for the final year of the Monte Carlo simulation. A successful trial has positive assets in every year including the last year. By default, it’s set to $0. By changing this number, you’re changing the last year’s guaranteed amount.

Interested in learning more about Monte Carlo? Check out our Monte Carlo Summit Series webinar for an in-depth look at Monte Carlo simulation and to learn best practices for presenting the results to your clients.

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