How ML Stats Calculates Portfolio Modeler And Retirement Calculator

This page explains the core calculation flow used by both financial calculators. Both tools run deterministic, month-by-month simulations based on your inputs and assumptions.

Portfolio Modeler: Calculation Flow

1. Build the portfolio from target weights and optional growth/yield overrides.
2. For each month, apply price growth to holdings.
3. Calculate monthly dividends and add them to cash.
4. In Standard mode, fund monthly income from cash first, then sell holdings according to sale order (lowest growth, highest growth, or equal).
5. In Three Bucket mode, initialize Bucket 1 and Bucket 2 from years of income, place the remaining value in Bucket 3, and fund spending from Bucket 1, then Bucket 2, then Bucket 3 as a last resort.
6. Three Bucket replenishment uses the selected cadence. Bucket 1 refills from Bucket 2 first, and Bucket 2 refills from Bucket 3 only when Bucket 3 had positive growth for the month.
7. Track monthly shortfall if assets cannot fully fund the target.
8. If DRIP is on, reinvest leftover cash by current weights.
9. In Standard mode, rebalance holdings back to target weights when scheduled. In Three Bucket mode, the cadence controls replenishment instead of full-portfolio rebalancing.

Portfolio Modeler Three Bucket Mode

• Bucket 1 is the near-term spending sleeve.
• Bucket 2 is the intermediate reserve sleeve.
• Bucket 3 is the long-term growth sleeve.
• Sales within the active bucket honor the selected sale order. Equal sale order is proportional within that bucket.
• Monte Carlo replays the same bucket logic while sampling inflation, growth, and yield assumptions.

Retirement Calculator: Calculation Flow

1. Build monthly expenses from base spending plus recurring and one-time events.
2. Apply inflation to base spending and inflation-enabled annual events.
3. Add fixed income sources (Social Security and pension streams).
4. Advance each investment account for growth and dividends.
5. Fill any remaining gap using withdrawal order rules.
6. Apply account-level DRIP and rebalance settings after withdrawals each month.
7. Record shortfalls, first shortfall timing, and ending net worth.

Retirement Calculator Withdrawal Order

1. Use fixed income, then saved RMD and income surplus cash.
2. Draw from eligible cash and investment accounts in the configured global priority order.
3. ACA protection limits income-generating withdrawals and can use eligible Roth funds and emergency cash; Strict reports spending that cannot be funded within the limit.

Inside each investment account, the model uses account cash first, then sells holdings based on that account's withdrawal strategy.

Retirement Age Gating And Penalties

• IRA, 401k, and Roth IRA withdrawals become eligible in the assigned owner's age-59? month, using their birth month and year.
• Explicitly allowing earlier withdrawals applies a fixed 10% penalty to gross distributions, including account cash.
• Roth contribution basis, conversion history, five-year qualification, and penalty exceptions are not modeled.

Important Assumptions And Limitations

• Static projections are deterministic. Monte Carlo views sample a range of inflation, growth, and yield assumptions.
• Taxes are not fully modeled as a tax engine.
• Transaction costs, slippage, and advisor fees are not explicitly modeled.
• Results are informational and educational, not guarantees, investment recommendations, or personalized financial advice.

Related Methodology

• Retirement Calculator Tax Treatment
• How ML Stats Calculates Portfolio Projections