📊Monte Carlo Retirement Calculator

Accounting for Sequence of Returns Risk

A major risk for Canadian retirees is a market downturn early in retirement. Monte Carlo simulations help you see how these poor early returns—compared to the TSX historical averages—could impact your portfolio's longevity. By stress-testing your RRSP and TFSA withdrawal strategies against thousands of market scenarios, you can determine if your current spending plan is sustainable during volatile periods in the Canadian and global markets.

Bank of Canada – Financial Stability

Integrating CPP and OAS Benchmarks

The Canada Pension Plan (CPP) and Old Age Security (OAS) provide steady, inflation-indexed income. Statistics Canada data shows these benefits are vital for lower-income deciles. When running your simulation, it's crucial to correctly time your CPP start (age 60-70) to see how it reduces the pressure on your private portfolio. Our tool allows you to layer these government 'pensions' into the simulation for a more accurate Canadian retirement outlook.

Statistics Canada – Retirement Income

Adjusting for Medical Inflation in Canada

While Canada has a public health system, out-of-pocket medical costs for items not covered by provincial plans (like long-term care) often grow faster than general inflation. The Canadian Institute for Health Information (CIHI) tracks these rising costs. Our Monte Carlo tool allows you to set higher inflation rates for specific expense categories, ensuring your simulated success rate accounts for the high cost of aging in Canada.

Canadian Institute for Health Information

What is a 'Success Rate' in a Monte Carlo simulation?

In the Canadian context, a 90% success rate means that in 9,000 out of 10,000 simulated market conditions, you didn't run out of money. It doesn't mean you will have a surplus; it means you survived. Many Canadian financial planners (aligned with FP Canada standards) recommend a success rate between 85% and 95% to allow for flexibility without being overly restrictive during your active retirement years.

How do Canadian taxes impact the simulation results?

Withdrawals from an RRSP are taxed as regular income, while TFSA withdrawals are tax-free. If your simulation doesn't account for these CRA rules, your success rate will be over-inflated. Our tool calculates the 'net' cash flow for each simulated year based on provincial tax estimates (like those in Ontario or BC), giving you a realistic picture of your actual spending power in retirement.

Does this tool account for Canadian house prices?

While the simulation focuses on liquid assets (RRSP, TFSA, non-registered), you can include home equity as a 'last resort' backup. CMHC notes that many Canadians plan to downsize to fund their later years. You can simulate a 'liquidity event' at age 75 or 80 to see how selling your primary residence impacts your overall survival probability in various Canadian real estate market scenarios.