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Lifetime Planner Monte Carlo Analysis (NEW)

Langston Holland

What a nice surprise - and well implemented. The 90/50/10 percentiles are industry standard and an excellent decision. Results are consistent with the excellent models available with Fidelity and Empower accounts, but Quicken is the only planner that adds future transactions to the user's current holdings for analysis.

One Ask: Autoscaling of the Y-axis forces the all-important 10th percentile line so close to the X-axis that it's hard to see in my case. Please add selections to separately enable/disable the 90th and 50th (median) percentiles to improve visibility of the 10th percentile trace.

Thanks!

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@Langston Holland , How did you get this graph? I am not able to find it!

Langston Holland

If you have the latest update, you should see this option (checkbox) at the bottom right of the standard Lifetime Planner histogram.

Thanks, that explains it. The latest one must be in a limited staged release and is not available to everyone yet - but I see where I can download it from.

Chris_QPW

Did they fix the RMD date?

EDIT: I found out that they have the manual patch available. At the moment I forget how to check for the RMD date, and I'm off doing something else, will check later.

EDIT2: They haven't fixed the RMD date.

Scooterlam

While its good to see some effort put into Lifetime Planner, I wonder why the developers did not opt to implement the "Add a Comprehensive Tax Model in LTP…" Idea as a prerequisite to this Monte Carlo feature?

The immediate issue (I suspect) in the sim result, is a ridiculously high 90% portfolio result (image at end). This is likely due to the fact that the tax rate % assumption remains fixed. A fixed tax rate assumption will not work well for both the "old" deterministic simulation (Linear) and the "new" Stochastic simulation (M/C), even with the separate before/after rates in the assumption dialog.

Why? Because in the high return runs in the M/C simulation, the much higher RMDs only are taxed at the average tax rate assumption and not against the marginal tax rates proposed in the Idea. So, as tax-deferred accounts get larger and larger in the high return runs, the RMD gets significantly larger and M/C results do not take enough tax expense out of the portfolio balance and thus the overstates 90% level.

Note that this issue is less noticeable at median and 10% levels and less noticeable for those without tax-deferred accounts (401k, IRA et al). It may have an affect on the success % rate as well.

Since the comprehensive tax model idea was archived due to loneliness, it should have been considered as part of the development plan for the MC feature. Maybe it was. I've attached a pdf of the idea thread for those who might be interested, below.

Regarding the historical rate of return and deviation assumption used in the MC feature, I would say that it would be much better to use the existing user's assumptions rather than "blending all asset classes for the years 1928 to 2023" and what appears to be an arbitrary std of 12%. In LTP today, the user provides a rate of return and an inflation rate based upon (presumably) their future portfolios "weighted rate of return". Its a simple formula to calculate the real-rate of return. The only remaining assumption is the std which is also based on the users weighted rate of return. Of course this then becomes a forward looking assumption, but I think that the historical assumptions for the M/C sim are odd.

Perhaps some additional transparency on how this was "put together" might give some additional confidence that the feature is reasonably sound.

Lifetime Planner IDEA_ Add a Comprehensive Tax Model in LTP as a User-Selected Option — Quicken.pdf

Langston Holland

Interesting idea. I enjoyed thinking about it, but I can see why it may never see the light of day. The Lifetime Planning module already affords a much higher level of granularity than available elsewhere that I'm aware of. At some point they have to decide where things get too busy speculating about the unknown (the future).

You're right to point out that the 90th percentile is overstated with increased taxation in this happy event, but that likely won't affect the much more important 10th percentile in the same way - poorer returns may even understate it (be overly conservative), which is great IMO.

What is interesting (that the Quicken help points out) is the gap between the 90th and 10th percentiles. Mine is wider than yours and likely due to my near 70% allocation in equities. I may be able to pull my 10th percentile trace up a bit with more bonds at the cost of ending net worth if everything is rosy. Of course that assumes I can't reduce spending, which I can easily cut in half if I stop gifting my kids. Lots of interesting variables, and Quicken helps thinking about them.

If Quicken were to add a variable tax rate, they should also allow variable inflation and investment return rates. I modify those rates sometimes just to see the effect and then go back to my best guess. Inflation changes are quite sobering.

The stochastic method of Monte Carlo analysis provides a reasonable variation on future investment return rates with its 200 iterations of the 1928-2023 market data. Since the market data used is real (adjusted for inflation), it also provides for the effects of variable inflation somewhat. Tax changes affect the market to a lesser extent, but there is also a bit of that in the real data. Hope we never see the 70's markets again. Overall, Monte Carlo is a lovely addition.

Just for fun, my "86% probability" of success simply means that 172 of the 200 iterations cleared being broke at the highest date on the graph (0.86 x 200 = 172). My 10th percentile trace likewise intersects the X-axis (broke) approx. 86% of the way to the highest date.

Yours is 100%, but there ain't no such thing as 100% about the future. :) Planning and paying attention is the best we can do, and Quicken is extremely helpful in that regard.

Chris_QPW

I was trying to get my head around what value the Monte Carlo analysis actually is.

As far as I can see it is a sanity check on one number, the rate of investment return you gave.

Fun with numbers. Since there are multiple numbers, you can set (before retirement, after, taxable, …) and I just wanted to see the effect I just set them to the same number (BTW not being able have the right RMD date and a different tax rate on that date is a miss.)

Here are some numbers:

1% rate of return → 100% likelihood the plan will succeed.

4% rate of return → 98% likelihood the plan will succeed.

20% rate of return → 100% likelihood that it will fail.

You will notice this has really very little to do with if you will actually have enough money for the plan and everything to do with the likelihood of getting the rate of return that you predicted.

I can see how this can be quite valuable, but it certainly isn't the vague idea of what I thought it meant going into this.

NotACPA

That "20% rate of return"with a 100% fail is funny … because over the last 3 years I've had, according to Q's "Investment Performance" report, a 28% per annum return.

YES, my investment accounts have doubled in 3 years. And I'm not even that aggressive. I'm 81% invested in 12 Fidelity mutual funds and not quite 19% in the stock of my former bank employer.

Shouldn't those results be the opposite?

Langston Holland

@Chris_QPW, I was unable to replicate the inverse relationship between user entered rate of return and plan success. In my case, the 10th percentile was least affected by rate changes (as expected), but those changes maintained positive correlation to success: 4% had a higher probability of success than 1% and 20% was best of all. The median (50th) and 90th percentiles went through the roof at a 20% return. I'd be a billionaire if I lived to 90. The miracle of compounding at Pelosi rates. :)

I also modified tax rates from 0% to 10% with similar results - I also disabled all investments except bonds, then disabled all investments except equities. The outcomes always maintained positive correlation between rate of return and probability of success.

Jim_Harman

I have not had a chance to experiment with this yet, but one thing I have seen with other tools is that if your allocation has a higher percentage of bonds, the projected return is lower but there is less of a gap between the 10% and 90% cases, i.e. the standard deviation of returns is lower. Conversely, an all-stock portfolio should give a higher expected return but a wider spread.

Is that what you are seeing?

Langston Holland

"Is that what you are seeing?"

@Jim_Harman - that is exactly what I'm seeing and it's an important point. You should reduce that deviation (risk) as your circumstance allows if your asset values are lacking or just enough or if you have a lower tolerance for risk. You can swing for the fence and expand that difference (take on more risk with heavier equity allocation) if you're nearing the 9th inning and/or comfortably ahead on the scoreboard. :)

Edit: While the theory behind this post is correct, I was wrong in my assumption that the Lifetime Planner takes asset classes into account separately. See my following posts below.

Chris_QPW

https://community.quicken.com/discussion/comment/20551052#Comment_20551052

The Lifetime Planner doesn't look at your securities at all.

If you have an account with $1,000,000 in cash and ask for a prediction, and then change that to one high risk security, the prediction will not change.

The Lifetime planner is using your "Rate of Return" number for "how risky" your securities are.

Chris_QPW

And BTW this makes sense. Think about what it would take to actually use your securities.

The Lifetime Planner would have to understand the risk factors of every security you own. It doesn't have that these days even in the other investment parts of Quicken.

Chris_QPW

https://community.quicken.com/discussion/comment/20551046#Comment_20551046

People might be interested in why I picked 20%. I picked because it was the largest number Quicken would allow me to type in. 😂 These numbers were just to test what the system is doing.

One of the reasons I got interested in this at all is because lately I created my own planner to see how good my assumptions lined up with what will play out in the future. This is in Excel and VBA (Basic language in Excel). The big difference is the fact that I will be comparing the predictions to my actual results over time. Not to mention that it has the RMD date right and uses the real tax tables. At first, I started trying to do a generic system, but it was getting too complicated, so I just tailored it to our exact situation.

And then just as I finished that, this feature popped up, so I figured that I would look at what actually does.

Since the beginning of the year, I haven't been tracking my investments in Quicken so when this came up, I just created my investment accounts as offline with just the cash balances. Later I changed the taxable one and my biggest one a Traditional IRA to a security that lost 75% of its value over the last year and the result was there was no difference between the two, just like I thought would be the case.

In my planner I don't try to deal with individual securities either. I notice that Fidelity focuses on doing it that way too, "return for portfolio/account" not the individual securities.

Chris_QPW

I tried this again, and now I'm getting success on all of the return numbers, so I don't know what changed from before… I will try to find out but think it is most likely user error. But just makes me more baffled at what this used for.

Chris_QPW

OK, I must have misread the "unsuccessful". And I was just concentrating on the percentage which is wrong since they all succeed with very high certainty. Looking at the graphs, 1% tracks down and has 100% probability that it will succeed. With 20% it has a probability of 99% and the 90th Percentile graph curves up so much that it makes the other graphs look flat.

Langston Holland

https://community.quicken.com/discussion/comment/20551060#Comment_20551060

Just tested what Chris said and he's right. :)

I added a test portfolio with $1M money market, then changed it to VOO (S&P 500 ETF). Exactly the same results. If I'd read the help more carefully that came with the new Monte Carlo module, I'd known that:

"The simulation draws from a baseline of real (inflation-adjusted) US investment returns across all asset classes for the years 1928 through 2023."

Like Chris said, you need to be reasonably accurate with your rate of return entry in the Lifetime Planner because the analysis is based on that. Still, this new feature is very helpful, probably the best thing it does is show the pessimistic 10th percentile where the market data outperformed that 90% of the time.

Edit: As mentioned in the OP, I also use the Fidelity and Empower Monte Carlo analysis online offerings. Both access and use the same investment accounts that Quicken uses, but don't have the expense granularity of Quicken. Thus you enter overall expense estimates. Empower, like Quicken, uses a fixed stock/bond allocation in its calculations, but Fidelity allows you to select a range of asset allocations or use your actual allocation.

Langston Holland

Monte Carlo Retirement Planner Summary

Fidelity's implementation is the most powerful and eliminates the need of a user selected rate of return since it is embedded in the historical market data based on allocation. Standard deviations also vary as they should based on allocation.

Empower's implementation is the least powerful and uses a fixed 6.8% annual return and 11.1% annual standard deviation, which is reasonable based on many estimates of the future with an approx. 60/40 allocation, but it's very limiting and makes comparisons to other methods difficult. Empower's real utility and power is in a module it calls "Investment checkup" which, like Fidelity, allows full user selection of allocations with their embedded returns and standard deviations as well as your actual allocation. The result of this not only offers return projections, but plots actual vs. recommended positions relative to the efficient frontier. Modern portfolio theory stuff - very cool.

Finally, Quicken's implementation fits between these two in power. Quicken requires rate of return selection, but uses a fixed standard deviation due to its fixed allocation. This is a reasonable compromise and the results are pretty close to what I get with Fidelity. It is highly likely that Quicken's Monte Carlo analysis uses a fixed 60/40 (stock/bond) allocation in its 1928-2023 real market data given the 12% standard deviation.

(See attached justification)

quicken-monte-carlo-grok.pdf

Jim_Harman

@Chris_QPW said,

The Lifetime Planner doesn't look at your securities at all.

If you have an account with $1,000,000 in cash and ask for a prediction, and then change that to one high risk security, the prediction will not change.

The Lifetime planner is using your "Rate of Return" number for "how risky" your securities are.

This is a good start, but I think the simulation would be more useful if instead of having you specify an expected return and using a fixed standard deviation, it let you specify an asset allocation or use your existing allocation and ran the simulation based on the historical returns for those asset classes. If you have defined custom asset classes, perhaps you could specify the expected returns for those .

Chris_QPW

https://community.quicken.com/discussion/comment/20551130#Comment_20551130

Totally agree!

rotygolf

Quicken made a good start with the Monte Carlo capability within the lifetime planner, but to be honest, it is very mediocre. I've tried using it and find it awkward. There are better tools on the web that allow the user to have more control. Of course, not everyone using a tool like this would make the right decisions so I see why Quicken tried to keep it simple.

Quicken needs to allow the user to control the standard deviation of return so they can better understand how that affects the results versus just picking a number from 1928-2023. As you all have said, its not using your assets. If I understand what Quicken is trying to do, Its basically using the value of your assets and forecasting what it might look like with the returns and plotting the 90, 50 and 10%. Obviously, if your expenses are too great your success degrades.

Most of these tools do reports in today's $ or in future $. I find that future $ can be misleading to people if they don't really understand the affect of inflation. You are better off looking at the results in today's $ because you can relate to it now.

I'm not a financial analyst or a certified planner, but an engineer that's built many simulations over my lifetime, and this is really no different. Garbage in means garbage out. A User needs to be aware.

mumana

In the 10% scenario (downside scenario) where do i see $ details by year? Is their a report or view that I have missed? Thanks

Chris_QPW

https://community.quicken.com/discussion/comment/20551542#Comment_20551542

For the Monte Carlo simulation this only "$ detail" they provide would be to look at the graph in comparison to the y-axis of the graph.

The per year details are only given when not in that mode and have no details on the Monte Carlo simulation.

Langston Holland

https://community.quicken.com/discussion/comment/20551542#Comment_20551542

In Monte Carlo mode, the calculations are annual, just like in the standard histogram mode. The traces are continuous simply because they connected the (annual) dots.

If you hover the mouse cursor along the plot you'll see the Monte Carlo calculations for each year's 90th, 50th and 10th percentiles, BUT you can also click and get the same numerical table presented in the histogram mode for each year. That's kind of goofy since the table doesn't apply to the Monte Carlo analysis, but it is approximately applicable to the 50th percentile (median).

Make sure you read the "more information" help on the bottom right of the plot. :)

jsnider47

I really like this. I compared it to our Boldin monte carlo and eMoney monte carlo and Fidelity monte carlo and it is in the ballpark. Good to see a nice range of outcomes. 12% standard deviation is reasonable albeit for say a 60% stock portfolio with 6% return. But it works to reasonably match the other comparison software. Boldin used 6% standard deviation for our conservative 4.82% return. Boldin uses what they call "moderate conservative" 6.84% return with a 12% standard deviation. I do wish I could input my own standard deviation. But this Quicken graph in hand is "good enough". 200 iterations is probably good enough too, since 10% = 20 outcomes. The clicking the graph with resulting portfolio is nice to see the details of the forecast for any year. Boldin has details but have to go to different charts to get it, eMoney has it better but not nearly as good as Quicken. Fidelity just the output. The best part is I don't leave Quicken. Plus the "what ifs" are very nice. I input a severe 5 year downturn starting on 4th of July 2026 for 5 years. Then did partial small 5 year recovery. Boldin can do it, but very difficult to do it easily. With Quicken, just entered a Special expense for multi-year market drawdown, and for recovery entered Income, not taxable for 5 years. Few iterations later figured out how to make the plan get to this - so did a very unique stress test, with just our Quicken planner. So overall good tool to compare to our Boldin plan. Plus with Tax center planner, we are spot for income taxes each year. Very pleased.

2026-04-30, Quicken normal monte carlo, Screenshot 2026-04-30 155657.jpg

Quicken 5 year severe, pemanent drop, tiny 5 year recovery, Screenshot 2026-04-30 153001.jpg

GGmaster

Thank you to all that have already posted. Very informative. Having worked on Fidelity's retirement planner tools, it is by far the most robust and will simulate at the asset allocation level. Much more accurate. This is a good start for Quicken. Lifetime Planner's strength is its simplicity in building the assumption model. It's easy to input additional expense and income scenarios. Straightforward and easy to manage. I would like to see the yearly $ changes for the different MC percentiles. That would be very valuable. that way you can see how close the 10th percentile comes to $0 throughout the plan. I also agree that being able to change the axis range so as to better see the 10th and 50th percentile on the graph would be great.

Langston Holland

@jsnider47, Thank you for the effort you put into your post - I learned a lot from it. :)

@GGmaster, Totally agree - the deeper I go into Fidelity, the more impressed I am with them. That applies to Quicken as well.

jignasze

just tried the Monte Carlo simulation - needless to say I'm underwhelmed on how bad it it. A free generic AI bot could have created something better. Every non-Quicken Simulator I've run puts me in the 90%+ and Quicken is barely above 60%…. makes me more concerned about the credibility of everything else Quicken does. My guess - 4 years or longer to even think about changing it and trying to make it better.