A Monte Carlo analysis runs a financial plan through thousands of randomly generated market scenarios and reports the share in which the money lasts, often called the probability of success.
Instead of assuming a steady return every year, the software draws a different run of good and bad years for each trial, based on assumed average returns and volatility for each type of investment. If the plan survives 850 of 1,000 trials, it reports an 85% probability of success.
The result is only as good as the inputs. Small changes in assumed returns, inflation, fees, or lifespan can move it a lot, and most models assume you never adjust spending. FINRA requires broker-dealers that offer these tools to state that the projections are hypothetical, don't reflect actual results, and aren't guarantees.
A low score is a signal to adjust the plan, not a forecast of failure. A very high score can mean you are spending less than you could.
How to check
Ask what return, inflation, and fee assumptions the analysis uses, and what counts as failure: running out of money entirely, or falling below a minimum spending level.
Sources
Related terms
Looking for an advisor? Browse fee-only advisors by location or specialty.