How the simulation works

The FIRE simulator doesn't apply a closed formula to an average return. It runs thousands of Monte Carlo simulations, each with a different market sequence and a different lifespan, and reports how often the plan held.

Monte Carlo simulations

Each simulation samples a sequence of your portfolio's real historical returns and projects it forward. These aren't invented returns or a theoretical distribution: they are the months your portfolio actually lived through, recombined.

Sampling happens in continuous 3-year blocks (block bootstrapping) rather than month by month. It's a technical choice that changes the result substantially: it preserves serial correlation, so crisis sequences stay intact, with the consecutive months of decline and recovery typical of 2008 or COVID.

Why it matters: sampling independent months would produce markets that are too kind. Real crashes aren't scattered bad months, they're consecutive bad months, and for a withdrawal plan the difference is enormous. That's the whole point of sequence risk.

Mortality sampling

Each simulation draws an age of death from official ISTAT mortality tables, based on your current age and sex. Every simulation therefore runs a different horizon.

Italian tables show life expectancy at birth of roughly 81.5 years for men and 85.6 for women, but with wide individual variability, and it's that variability the model captures.

The stochastic approach is more realistic than a fixed horizon. Planning for "until 95" means sizing capital against a scenario that statistically occurs rarely, and concluding you need to work more years than you do.

If you prefer a deterministic horizon anyway, the Simulation end field lets you fix one age for all simulations.

Two-phase model

Accumulation phase (current age → FIRE):

• Contributions are added to the portfolio
• Historical monthly portfolio returns are applied
• Unexpected events, if enabled, can reduce value

Recurring expense rows (rent, everyday costs) don't touch the portfolio during this phase: the model assumes your salary covers them. Only portfolio contributions and one-time costs (a black swan event, a specific-age expense) actually move money in or out before FIRE.

FIRE phase (FIRE → death):

• Monthly withdrawals cover expenses, adjusted for inflation
• Pension income, if enabled, reduces the withdrawals needed
• Capital gains tax applies to withdrawals
• Market returns keep acting on remaining capital

Definition of success

A simulation is a success if the portfolio survives to the sampled age of death; a failure if it runs out first.

The probability of success is simply the share of successful runs.

There's no universally correct threshold. Above 80% a plan is generally considered robust; 100% almost always means you're accumulating more than necessary and therefore working longer than necessary. Your flexibility matters too: someone who can cut spending in a bad year tolerates a lower probability than someone with a rigid cost structure.

The role of rebalancing

The rebalancing frequency you set builds the historical return series the simulation works on. With Never, weights follow buy & hold and drift over time; with a periodic or drift-based cadence the portfolio returns to its target allocation. Covered in depth in Rebalancing.

What the model doesn't capture

• Structural regime changes with no precedent in the historical series.
• Your emotional reaction: the model assumes you follow the plan even after a −40%.
• Changes to taxation or state pensions over the coming decades.
• The fact that real spending is rarely a smooth line indexed to inflation.

A 90% plan isn't a promise. It's a way to understand how much margin you have, and which levers (contributing more, working one more year, spending slightly less) actually move the needle.