Purpose and scope
Financial Life Simulator explores how long-term financial outcomes evolve under uncertainty. It does not attempt to predict the future, but to model a range of plausible paths.
Methodology
Simulation methodology
A transparent explanation of how long-term financial outcomes are modeled in Financial Life Simulator.
At a glance
Simulations model yearly cash flow, investment growth, and life events under uncertainty.
Modeling approach
Each simulation represents a year-by-year trajectory, starting from a defined age and ending at retirement.
- Income: grows over time with variability
- Expenses: linked to saving behavior
- Investments: subject to market volatility
- Inflation: erodes purchasing power
Life events considered
Real life is not smooth. The model includes stochastic events that can temporarily disrupt financial stability.
- Unemployment: temporary loss of income
- Health events: additional expenses
- Extended shocks: multi-year disruptions
Monte Carlo simulations
For each scenario, thousands of independent runs are generated. Each run represents one possible future path under the same assumptions.
Inputs are drawn from distributions to reflect uncertainty in income growth, investment returns, inflation, and life events.
Interpreting results
- Median: a typical outcome
- P10: pessimistic but plausible paths
- P90: optimistic but realistic paths
These ranges illustrate risk, not guarantees.
Limitations
No model can capture all aspects of real life. Policy changes, personal decisions, and rare events may materially alter outcomes.
Educational use
This tool is provided for educational and exploratory purposes only and does not constitute financial advice.