Educational information, not individual financial advice.
Key Takeaways
A fan chart or percentile band chart is the standard visualization for Monte Carlo results. Reading it correctly is the difference between a sophisticated understanding of your plan and a misleadingly rosy picture.
If the 10th percentile of your portfolio at year 30 is $600,000, that means: 10% of Monte Carlo trials end at $600,000 or below. 90% of trials end higher.
Similarly:
The distribution isn't symmetric. The upside tail can be enormous (one trial might compound favorably to $10M+); the downside is bounded at zero (can't go below zero once depleted).
Most Monte Carlo visualizations use a fan chart:
The fan widens over time because uncertainty grows. In year 1, the range is narrow (few things can happen). In year 30, the range is wide (compounding uncertainty produces vastly different outcomes).
Check the median. The center line tells you the expected outcome. If you're planning to retire and the median portfolio at age 65 is $2M, that's the "typical" result.
Check the lower percentiles. The 10th or 25th percentile matters more than the median for retirement safety. If the median is $2M but the 10th percentile is $200k, your plan has significant downside risk.
Check the upper percentiles. The 90th percentile shows the upside — how much your portfolio could grow in a good scenario. Useful for legacy planning.
Check the fan width. Narrow fan = stable plan. Wide fan = uncertain plan, possibly because of high equity allocation or aggressive assumptions.
A common error: planning around the median and ignoring the lower percentiles.
"The median says my portfolio will be $1.8M at retirement. That covers my needs."
But the 10th percentile says $400k. That's a meaningful chance of being much worse than expected. Planning ONLY for the median means 50% of scenarios produce worse-than-planned outcomes, and 10% of scenarios produce outcomes so bad the plan may not work.
Better practice: check multiple percentiles and ensure the plan is robust at the 25th or lower.
"The 75th percentile is $3M" does NOT mean "there's a 75% chance I'll hit $3M."
It means "75% of scenarios end below $3M; 25% end above."
Subtle distinction but important. The percentile is a cumulative probability, not a point estimate.
The fan always widens with time. This reflects compounding uncertainty:
This widening isn't a bug — it's reality. Long-horizon uncertainty is much larger than short-horizon uncertainty.
A 10th percentile of $400k at year 30 doesn't mean your portfolio drops steadily to $400k. It's an aggregate. The individual trial that produced $400k at year 30 might have been at $2M in year 15 and dropped from there, or at $100k in year 10 that never recovered. Percentile bands hide individual paths.
Horizons exposes some individual paths through the "sampled trial" display — viewing a handful of random trials gives texture that aggregate bands can't.
These are related but different measures:
High success rate doesn't mean high minimum. A plan can have 95% success rate with the lowest 5% of trials having portfolios of $50k — technically "success" but well below goal.
A good Monte Carlo visualization often produces emotional reactions that simple numbers don't:
These reactions are often correct. Fan charts effectively communicate risk better than percentages alone.
Horizons' fan charts use the percentile bands described above. Hovering over any point in time shows the specific percentile values at that age. You can toggle between "nominal" and "real" (inflation-adjusted) views to see outcomes in today's dollars. The Retirement page also shows individual-trial traces to reinforce that percentile bands are aggregations, not single paths.
Known limitations
Sources
Educational information distilled from the Horizons engine methodology — not individual financial advice.
Try this next
Monte Carlo Simulation Explained
More related reading