Page 75 - Ready Set Retire

Ready. Set. Retire!

around half of that. The result is that an insurance company
can afford to pay around double what you could pay yourself,
and guarantee it for the rest of your life.

Myth #4: Monte Carlo is the Way to Go

Many, if not most, financial planners employ a technique called
Monte Carlo planning to provide a window into the probability
that a plan will not blow up on the client. In theory, it seems
like a good idea, but from my perspective it should only
supplement other techniques, not as a standalone approach.

Monte Carlo was first employed in the 1940s in the Manhattan
Project. Scientists wanted to know how various nuclear
particles behaved under varying circumstances. It turns out it’s
a very valid tool for this. In my non-physicist opinion, it’s
because the laws of nature are specific in the way they respond
to various stimuli. For example, when you apply heat, they will
often become agitated, and in cold they will slow down. High
and low pressure, vacuum, temperature, radiation
bombardment, explosions, electricity and many other things
can be applied to the experiment, and then scientists can run
thousands of simulations (the Monte Carlo piece), carefully
measuring the probabilities of certain results. However, these
are controlled experiments where the researchers can carefully
control the inputs while measuring the outputs.

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