Understanding the Retirement Failure Analysis Table (Analysis is only for Equity Returns)

Percentile: This represents different confidence levels in failure cases. For example, "Bottom 10%" means the worst 10% of failed cases, while "Bottom 100%" includes all failures.

Failures Count: The total number of simulations that failed (i.e., lasted less than the retirement failure limit). Example: If 50,000 simulations were run and 12,000 failed, this column will show numbers like 1,200 for bottom 10%.

Total Simulations: The total number of retirement simulations run. This provides context for failure rates.

Failure Rate (%): The percentage of simulations that failed out of the total runs. Example: If 12,000 out of 50,000 simulations failed, the failure rate is (12,000/50,000) × 100 = 24%.

Mean Return: The average annual return across all failed simulations in the given percentile. Example: A mean return of 4.5% means the average portfolio return across all failures was 4.5% per year.

Standard Deviation: Measures the volatility of returns. A higher value means returns fluctuated more, increasing uncertainty.

Worst 3-Year Return: The worst return experienced over any 3-year period in that percentile. If this is -25%, it means the worst 3-year stretch saw a 25% decline.

Worst 5-Year Return: The worst return experienced over any 5-year period. Example: If -30%, it means at some point, a retiree’s portfolio dropped 30% over 5 years.

Worst 10-Year Return: The worst return over any 10-year period in the simulation. This is crucial for understanding long-term downturns and sequence risk.

Max Drawdown: The maximum loss from peak to bottom during the failed simulations. Example: If this is -50%, it means the portfolio at some point lost half of its value.

Negative Years Count: The absolute number of years with negative returns in each percentile. If this is 12, it means 12 years had negative returns within that percentile’s failures.