Hi, my name is Tyler Scott, and I’m one of the Certified Financial Planners here at Cornerstone Wealth Strategies.

We have an important topic to discuss today: Can I retire now? One of the most common questions we receive from clients is whether they have enough resources to retire confidently. To help answer that question, we use a statistical measure within our financial planning process that helps evaluate the likelihood of a successful retirement plan.

The software we use is called eMoney, which we refer to as WealthVision here at Cornerstone. Let’s take a look at one of the retirement planning graphs generated by the software and focus on the statistical measure that helps us evaluate retirement readiness.

In this example, we’re looking at a retirement projection for clients who plan to retire at age 60. The large marker on the graph represents the beginning of retirement. The colored sections illustrate the various sources of income that are used to support retirement spending.

At the bottom of the graph, the darker section represents Social Security income. These clients also have a pension, shown in teal. The yellow portions represent withdrawals from investment assets used to supplement income throughout retirement. Early in retirement, the spending needs are slightly higher because the clients are still paying off a mortgage. Later in retirement, around age 75, the graph reflects Required Minimum Distributions (RMDs), which increase the amount being withdrawn from retirement accounts.

The statistical measure we’re focusing on is called a Monte Carlo Analysis. This analysis runs approximately 1,000 different market scenarios using a range of possible investment returns and market conditions. Rather than assuming markets perform exactly as expected every year, the analysis introduces variability to stress-test the plan.

Why is this important? Retirement planning isn’t just about determining whether you have enough assets today. It’s about evaluating whether those assets can support your spending needs throughout retirement, even if markets experience periods of poor performance. The Monte Carlo Analysis simulates different combinations of good markets, average markets, and challenging markets while also accounting for ongoing withdrawals from your portfolio.

The key number to focus on is the Probability of Success. In this example, the plan has a 99% Probability of Success, which means that 99% of the 1,000 market scenarios successfully support the client’s retirement goals through the end of the planning period. On average, the plan is projected to leave approximately $3.2 million remaining at the end of the projection. Ideally, we want to see assets remaining at the end of the plan rather than running out of resources entirely.

One of the advantages of financial planning software is that we can model different scenarios and test how they affect the probability of success. For example, a client may ask, “What happens if I spend a little more money during retirement?” We can increase spending assumptions and immediately see how that affects the overall plan.

Suppose a client wants to spend more early in retirement and reduce spending later. In one scenario, the retirement plan still maintains a 96% Probability of Success. Generally speaking, a probability above 90%, given the assumptions built into the plan, is considered very strong.

We can also model specific goals. For example, if a client wants to travel for five years and spend an additional $10,000 per year, the Probability of Success drops slightly to 95%. The impact is modest because the additional spending is temporary rather than continuing throughout the entire retirement plan and increasing with inflation year after year.

Another concern many clients have is the possibility of a health event. We can model that as well. In this example, we added a long-term care expense for one spouse beginning at age 80 and lasting through age 85. Even after incorporating those additional healthcare costs, the plan still maintains a 97% Probability of Success.

It’s also important to understand that the Probability of Success reflects the last year of the retirement plan. When the software analyzes longevity risk, it considers the possibility that one or both spouses are still alive during the final years of the projection and measures whether the plan continues to support their income needs through those years.

Ultimately, a Monte Carlo Analysis helps stress-test your retirement plan and provides a useful framework for decision-making. It allows us to explore questions such as:

• Can I retire now?
• Can I afford to spend more?
• What happens if I travel more?
• How would a healthcare event affect my plan?
• What if market returns are lower than expected?

While no planning tool can predict the future with certainty, Monte Carlo Analysis helps us evaluate how resilient a retirement plan may be under a wide range of potential market conditions.

If you have questions about anything I’ve discussed today, please don’t hesitate to reach out. I’d also like to briefly introduce our team. Here at Cornerstone, we utilize a collaborative approach to financial planning. Our team includes wealth advisors, financial planners, and specialists who work together to help clients make informed financial decisions.

We also have attorney Beau Ruff on staff, who supports our estate planning discussions, and Cameron, who serves as both a wealth advisor and trader. Together, we work to provide comprehensive guidance across all areas of financial planning.

Thank you very much for attending. If you have any questions about retirement planning, financial planning, or Monte Carlo Analysis, we’d be happy to help. Have a great day.