What does a retirement risk analysis tell you?

A retirement projection based on one smooth return shows how a plan works under one assumption. Risk analysis asks a harder question: how often did the plan cover spending when returns and inflation arrived in many different sequences? The result is a way to compare sensitivity—not a prediction of your future.

Reviewed August 2, 2026 · Educational information, not individualized advice

Why the order of returns matters

Two retirements can experience the same long-term average return and finish very differently. Losses early in retirement can be especially damaging because spending withdrawals remove assets before a recovery. Later gains then compound on a smaller balance. This is commonly called sequence-of-returns risk.

Inflation also arrives unevenly. A period of high inflation near retirement can permanently raise planned spending while markets are weak. Testing market returns and inflation together provides information that a constant annual return cannot show.

Spending coverage Was every modeled need funded?

The primary success measure checks for any unfunded spending through a stated age.

Possible balances How wide was the outcome range?

Cautious and middle balances show different positions within the same simulations.

Shortfall severity When and by how much?

Shortfall age and total unmet spending describe the paths that did not fully succeed.

What “modeled probability of success” means

In this planner, Spending Covered Through an Age is the percentage of generated paths that funded every modeled spending need through that age. If 960 of 1,000 paths cover all spending through age 80, the displayed modeled success rate through age 80 is 96%.

That does not establish a scientifically measured 96% real-world probability. It means 96% of the paths generated under the selected spending, longevity, tax, allocation, return, inflation, and modeling assumptions met the planner's definition of success.

Why the planner reports two success rates

Success through the primary horizon age

This rate answers whether spending was covered through the age most important for the user's main planning comparison, such as age 80. It helps keep a very long ending age from hiding how the plan performs during the user's central decision period.

Success through the ending age

This rate tests the complete projection, such as through age 95. A materially lower ending-age rate signals longevity risk after the primary horizon. Compare different tools only when they measure success through the same age and use a similar definition of spending coverage.

How to read possible portfolio balances

The balance labels are percentile positions within one group of simulated paths. They are not separate economic forecasts and they are not the same as the selected long-term Market Assumption.

Very Cautious Low-end 1-in-10 result

About 9 out of 10 modeled paths finished at or above this balance.

Cautious Lower 1-in-4 result

About 3 out of 4 modeled paths finished at or above this balance.

Middle Half above, half below

The median balance divides the modeled outcomes into two equal groups.

A zero Very Cautious or Cautious balance does not by itself show how frequently spending failed. Some paths can use the entire portfolio while Social Security or other income continues to cover spending. Check the success rate and shortfall columns before interpreting a zero balance.

Market Assumption and outcome label are different layers

The selected Market Assumption Long-Term Returns sets the center around which the simulated portfolio returns are adjusted. Very Cautious, Cautious, and Middle then identify outcomes within that complete group.

Choosing Lower returns and then reading the Very Cautious balance applies two layers of caution: a lower long-term center and a low-end outcome from the simulations around that center. This can be useful as a stress test, but it should not be mistaken for another planner's standard 90%-confidence result unless the underlying return, inflation, tax, spending, and timing methods are also comparable.

How this planner creates simulated futures

The recommended Historical Multi-Year Sequences model samples contiguous five-year blocks from the planner's reviewed 1928–2025 market and inflation history. Keeping years together preserves more observed crashes, recoveries, inflation regimes, and relationships among asset classes than independently selecting every year.

The sampled portfolio paths are recentered on the selected long-term Market Assumption without removing their year-to-year variation. Inflation is recentered in the same manner. Published Social Security COLAs remain unchanged; unknown future COLAs move with modeled inflation.

Every active Social Security and Roth conversion strategy is evaluated against the same paths. This paired comparison prevents one strategy from receiving randomly better market conditions than another and makes repeated runs with the same settings reproducible.

Future dollars and inflation-adjusted dollars

Future Dollars are the number of dollars projected for a future year. Inflation-Adjusted Dollars express that balance using the purchasing power of the first projection year. Use inflation-adjusted amounts when you want to understand what a future balance may buy or compare it with another planner displaying today's dollars.

Neither amount is automatically an after-tax liquidation value. Traditional IRA dollars may still be taxable when withdrawn.

A practical way to use the results

Start with realistic spending, income, account balances, allocation, and longevity assumptions.
Compare strategies using the same generated paths, horizon age, and ending age.
Review spending coverage first; do not choose a strategy solely because it has the largest middle balance.
Inspect the Very Cautious balance and the lower edge of the chart for weak-outcome resilience.
For failed paths, review the typical first shortfall age and total inflation-adjusted shortfall.
Stress-test higher spending, lower returns, higher inflation, and a longer life.
Look for decisions that remain acceptable across several reasonable assumptions.

Related guides and resources

Test your retirement strategy across uncertain futures

Compare spending coverage, possible balances, and shortfall risk for Social Security and Roth conversion strategies using your selected horizon and ending ages. No account or financial-data upload is required.

Open Retirement Risk Analysis