Optimal Finance Daily · Friday, August 14, 2026
Darrow Kirkpatrick criticizes retirement calculators that employ Monte Carlo simulations, stating they often rely on Gaussian randomness which doesn't accurately reflect market behavior. He argues that stacking too many random factors ignores long-term trends and produces a vast number of unlikely scenarios, rendering the output less useful for accurate prediction.
“These simulations require you to input a range of possible values for every parameter: inflation, investment returns, and so on.”
“The vast majority of those paths are very unlikely. It turns out that markets aren't actually completely random.”
“And the randomness they do exhibit isn't the normal Gaussian randomness most often used in Monte Carlo calculators.”