What is the difference between a normal and Laplace distribution in Monte Carlo simulations? Which one should I use?

Although many random variables exhibit a normal distribution, equity and fixed income returns have exhibited a Laplace distribution over the past ten years. A Laplace distribution has fatter tails than a normal distribution, which increases the probability of extreme events relative to a normal distribution. In statistical terms, a Laplace distribution has kurtosis of 6.0, while a normal [...]

How are Monte Carlo simulations run and where do the assumptions come from?

How Monte Carlo Works in WealthTrace Monte Carlo analysis estimates how often a retirement plan “works” by running many possible market paths and checking whether the plan runs out of money in any of them. src="https://cdn.livehelpnow.net/clients/21145/kb/mck1_7d4e524e-7680-4673-a872-9ae4d6c1a929.png" id="6bd22740-b241-4e4d-a440-24b463cc6452" alt="mck1" width="90%" height="auto" [...]

Where do I view and change the default annual return assumptions used in the program?

To view and edit the default annual returns go to Global Settings > Asset Class Mapping. You can edit the annual returns used in the program for each asset class by clicking on the row you want to edit. You can also add a new asset class here, such as REITs or cryptocurrency, and assign it to investments or holdings. [...]

In the Cash Flow Distributions section the beginning investment balance next year does not equal the ending investment balance this year. Why not?

This is due to placing everything in today’s dollars. In order for all numbers in each year to add up, the beginning balance is also reduced by the inflation rate in that year. That is why the beginning balance does not equal the previous ending balance. It’s basically a quirk of math when placing everything in today’s dollar terms by stripping out inflation. If you turn off using ‘today’s [...]

Does the program estimate state income taxes?

Yes, the program will accurately calculate your state income tax rates based on the state you live in or will move to in the future. You can find state tax settings under Plan Settings>Taxes. src="https://cdn.livehelpnow.net/clients/21145/kb/stax4_023266ef-91b7-4958-982b-9b37b2fff961.png" id="1a2de0c5-b0dc-4717-b930-03c998e24148" alt="stax4" width="90%" height="auto" [...]