About the Stochastic Approach

A robust method to estimate the required retirement corpus is to use the Stochastic Approach. A stochastic method will not provide a single outcome, but a range of possible outcomes. In this approach, your retirement portfolio is put through different scenarios of equity returns, debt returns and inflation to check if it is able to last for the full retirement period.

Using the technique of simulations, thousands of simulations are run using historical data of equity returns, debt returns and inflation to check for the adequacy of a retirement corpus.

This is a superior approach to calculate the required retirement corpus which you can explore via this page.

The discerning user will notice that as equity allocation increases, the withdrawal rates go up but soon starts falling. To understand why this happens, please see here.