Educational information, not individual financial advice.
Key Takeaways
You ran a Monte Carlo simulation. You see a fan-shaped chart with a darker line in the middle and shaded bands above and below. Somebody told you to "look at the 10th percentile." What does that actually mean for your retirement?
This is a non-statistical reading guide. No standard deviations, no normal-distribution diagrams. Just the practical translation.
Horizons runs your forecast 2,000 times, each time with different randomly-drawn market returns. At each month, it sorts those 2,000 outcomes from worst to best.
That's it. It's just sorting and ranking, nothing fancier. The "fan" shape comes from doing this at every month, then connecting the dots.
If your retirement plan only works at the median — meaning, exactly 50% of simulated futures keep you afloat to age 95 — then half the time you'll run out of money. That's not a plan; it's a coin flip.
Plan for the 10th percentile. If your plan still works in the bottom 10% of futures, you have a robust plan. If only the top 50% of futures work, you're betting on luck.
Concrete example. Your forecast says:
If your retirement spending plan needs $2M to work, the median says you're fine — but the p10 says you're not. There's a 1-in-3 chance (roughly) you end up below $2M, and a 1-in-10 chance you end up below $1.6M.
The right question is: what spending level still works at p10? If your $2M plan only works above the 70th percentile, you have a 30% chance of failure. Lower the spending plan, work an extra year, save more — until p10 covers it.
Look at the gap between p10 and p90 (or p50, doesn't matter — pick a pair).
Narrow spread (small gap): Your plan is mostly insensitive to market returns. You're saving aggressively or your time horizon is short or your asset allocation is conservative. Even bad markets don't tank you; even great markets don't make you rich. This is good if you're risk-averse, bad if you're hoping for upside.
Wide spread (large gap): Market luck dominates. The difference between a great career-ending market and a brutal one is huge. This is typical for stock-heavy portfolios with long horizons. The mean is high, but so is the variance.
There's no "right" answer here. A 25-year-old with everything in stocks should have a wide spread — that's the price for compound growth. A 65-year-old should have a narrow spread — they don't have time to recover from a bad first decade of retirement.
When you look at the Horizons forecast, the deterministic line is one specific scenario — the one where every market return matches your assumed average. The Monte Carlo cone is hundreds of alternatives.
Read the cone width, not the line height.
If the cone is narrow, the deterministic line is a reasonable single-number summary. If the cone is wide, the deterministic line is misleadingly precise — your actual outcome could plausibly be anywhere across the band.
For Beginner-tier users: a quick rule of thumb is to glance at the cone at age 75 (well into retirement) and ask: is the bottom of the cone above zero? If yes, your plan survives most scenarios. If no, your plan needs work.
A good plan still works in bad markets. The percentile band is the cheapest way to see whether yours does.
Your Monte Carlo result has a comfortable median (50th percentile) but a 10th percentile below your spending needs. Why plan around the 10th?
Try it in your scenario
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