Methodology & Logic

A transparent look at the math, formulas, and assumptions driving your simulation.

Core Philosophy

Portfolio Simulator uses industry standard growth math while you are building wealth. Once withdrawals begin, it shifts to a more conservative modeling approach designed to test sustainability under adverse conditions rather than maximize projections.

Growth Phase (Accumulation)

How Portfolio Simulator calculates wealth building

The Math: Nominal vs. Effective

The simulator supports two calculation modes. Effective (APY) ensures your annual result matches your input exactly. Nominal (APR) simply divides the rate by 12, which results in slightly higher returns due to monthly compounding.

Which should I use?

Stick with Effective (Default). This matches how investment returns (CAGR) are typically quoted. Only use Nominal if you are modeling a debt payoff (like a mortgage) calculated as APR.

Effective (Default)

r_m = (1 + r_{\text{annual}})^{\tfrac{1}{12}} - 1

Nominal (Advanced Settings)

r_m = \frac{r_{\text{annual}}}{12}

Timing: End-of-Month

Growth assumes you contribute money at the end of the month. This means your new contributions don't earn interest in the very first month they are added.

Prevents Over-Estimation

Withdrawal Phase (Decumulation)

How Portfolio Simulator helps your money last

Inflation & Real Value

Calculating purchasing power in today's dollars

Monte Carlo Simulation

Understanding volatility and risk

Taxes & Efficiency

How the simulator handles different tax environments

Assumptions & Limitations

Important constraints to keep in mind

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