Better Understanding Monte Carlo Output
I continue to try to fully appreciate and understand the monte carlo data output found in the Trajectory Report. Please review the following and see if I am on the right track:
I ran a report that resulted in the following information on the PROBABILITY OF LIVING STANDARD RANGE worksheet within the Monte Carlo Trajectory Report:
0-25%: 1%
25-50%: 6%
50-75%: 15%
75-100%: 20%
100-125%: 24%
125-150%: 14%
150-175%: 10%
175-200%: 4%
200%+: 5%
This data was found along the 100 years-old line where the individual is assumed to live to 100. In this scenario, the Living Standard is $57,338 where I simply used $1M and a 75% S&P and 25% fixed income.
I want to know what the 'liklihood' is of this individual successfully living to age 100 and enjoying the calculated living standard of $57,338. It appears that if I total the percentages that are in the groupings that are 100% OR GREATER, I will find his/her percentage liklihood of success of enjoying that living standard through to the age of 100. In the example above, I total 24%, 14%, 10%, 4% and 5% and get 57% as the percentage chance that he/she will be successful.
Am I interpreting the report in a valid way? Thank you.
P.S. I can email the relevant Excel report if desired.
RSS
The Monte trajectories can't be interpreted in the manner you suggest. They simply show that if one earns poor, good, medium high, or very high returns on average over one's lifetime, one will still experience a lot of year to year variation in one's living standard.
The other Monte report shows you the probabiities of certain ranges of living standards. These are the pertinent probabilities to consider.
best, Larry
Liteheart:
Of course Larry knows this program much better than anyone, especially me. But it does appear that he misunderstood your question. You were in fact asking about the "probabilities of certain ranges" which he refers you to. That's the report your were asking about. So I would say, yes, you are on the right track. But instead of taking the averages from the last line only, the 100 year old line, take the averages of the entire column and add together the averages that are at the bottom of each column. This will group the averages of 100% or better. You can copy and paste the columns into Excel. If you total all the numbers in all the columns to right of 100%, including the 100% column, then you will aggregate those percentages into one percentage number that represents the likelihood of 100% or better. So I think you are correct here or almost correct (don't take just the last row). Larry's answer confuses me because he refers you to a table that you are already using. But I'm just another customer trying to figure this out, so take my words with caution.
Dan
It's interesting, but I'm a new user and I still have this same question and I'm writing this in December, 2011. Has anyone prepared a simple "How to Read This Report" statement for each of the various reports from a non-statistician's point of view?
Or more likely, there is just such a simplified description but I haven't found it yet?
Did you look at the discussion of the Monte Carlo reports in the HELP manual? See if that helps. The PDF of the manual is linked at the top of the LEARN page above.
http://www.esplanner.com/learn