Methodology
How the Math Works
Every number has a source. Every model has a citation. Here's exactly what's under the hood.
Monte Carlo Simulation
RetireWise generates up to 10,000 independent simulations of your retirement, each with a different sequence of market returns drawn from realistic probability distributions.
Rather than assuming a single average return, Monte Carlo analysis captures the risk of poor market timing — what happens if a crash hits in your first years of retirement, when you're most vulnerable.
Each simulation models year-by-year portfolio growth, withdrawals, taxes, Social Security benefits, and inflation. The result is a probability distribution showing how often your plan succeeds across thousands of possible market futures.
10,000 scenarios
Each with independent random market returns
Year-by-year modeling
Portfolio, withdrawals, taxes, inflation
Probability score
What percentage of scenarios succeed
Capital Market Assumptions
Our forward-looking return estimates come from JPMorgan's Long-Term Capital Market Assumptions (LTCMA 2026), one of the most widely used institutional forecasting frameworks.
We model 9 asset classes with expected returns, volatilities, and a full 9×9 correlation matrix — capturing how asset classes move together during market stress.
| Asset Class | Expected Return | Volatility |
|---|---|---|
| U.S. Large Cap | 6.70% | 16.47% |
| U.S. Small Cap | 6.90% | 21.10% |
| International Developed | 7.50% | 17.63% |
| REITs (Real Estate) | 8.80% | 17.40% |
| U.S. Aggregate Bonds | 4.80% | 4.76% |
| TIPS (Inflation-Protected) | 4.30% | 5.88% |
| International Bonds | 4.30% | 9.06% |
| Commodities | 4.60% | 18.32% |
| Cash / Money Market | 3.10% | 0.67% |
Returns are compound (geometric) nominal. Expected inflation: 2.5%.
Correlation Matrix
Asset returns are not independent — equities tend to fall together during crises while bonds may rise. We use the full 9×9 correlation matrix to capture these co-movements in portfolio risk calculations.
| Lg Cap | Intl | Bonds | Intl Bd | TIPS | REITs | Sm Cap | Commod | Cash | |
|---|---|---|---|---|---|---|---|---|---|
| Lg Cap | 1.00 | 0.35 | 0.30 | 0.38 | 0.34 | 0.38 | 0.27 | 0.20 | 0.01 |
| Intl | 0.35 | 1.00 | 0.35 | 0.16 | 0.02 | 0.69 | 0.80 | 0.53 | −0.03 |
| Bonds | 0.30 | 0.35 | 1.00 | 0.76 | 0.76 | 0.41 | 0.26 | 0.27 | 0.10 |
| Intl Bd | 0.38 | 0.16 | 0.76 | 1.00 | 0.66 | 0.33 | 0.14 | −0.17 | 0.12 |
| TIPS | 0.34 | 0.02 | 0.76 | 0.66 | 1.00 | 0.23 | −0.05 | −0.21 | 0.02 |
| REITs | 0.38 | 0.69 | 0.41 | 0.33 | 0.23 | 1.00 | 0.62 | 0.43 | −0.02 |
| Sm Cap | 0.27 | 0.80 | 0.26 | 0.14 | −0.05 | 0.62 | 1.00 | 0.47 | −0.04 |
| Commod | 0.20 | 0.53 | 0.27 | −0.17 | −0.21 | 0.43 | 0.47 | 1.00 | 0.28 |
| Cash | 0.01 | −0.03 | 0.10 | 0.12 | 0.02 | −0.02 | −0.04 | 0.28 | 1.00 |
Source: J.P. Morgan Asset Management, Long-Term Capital Market Assumptions, 30th Annual Edition (2026). All figures are forward-looking estimates, not historical averages.
Tax Modeling
RetireWise uses actual 2025 federal income tax brackets from IRS Revenue Procedure 2024-40. This includes all seven marginal tax rates, standard deductions by filing status, and capital gains thresholds.
The Tax Strategy engine models Roth conversion ladders, optimal withdrawal ordering across account types (Traditional IRA, Roth IRA, Taxable), and IRMAA surcharge thresholds for Medicare Part B and Part D.
State taxes are not currently modeled. This is noted to users and is on our development roadmap.
Social Security Model
Our Social Security optimizer computes estimated benefits for claiming ages 62 through 70 using the full PIA (Primary Insurance Amount) reduction and delayed retirement credit schedule.
Early claiming (before FRA) reduces benefits by 5/9 of 1% per month for the first 36 months and 5/12 of 1% for additional months. Delayed claiming beyond FRA earns 8% per year in delayed retirement credits.
The optimizer calculates cumulative lifetime benefits at each age based on user-entered life expectancy, showing exact break-even ages and total payout differences.
Historical Returns
For backtesting and historical context, we use annual return data from 1928 to 2023:
S&P 500 total return (including dividends), 10-Year U.S. Treasury bonds, and MSCI EAFE (International Developed) from 1970.
Historical data is used in the standalone calculators for context. The core planner uses forward-looking JPM assumptions for projections, not historical averages.
Roadmap
- State and local income taxes — coming soon
- Social Security spousal and survivor benefits
- Required Minimum Distributions (RMDs) — planned
- Estate planning and inheritance optimization
- Individual stock or alternative asset modeling