How FreeFrom works

Overview

What FreeFrom is

FreeFrom is a historical sequence-of-returns simulator. It asks a single core question: If you had retired at every possible starting point in recorded market history, how often would your portfolio have survived?

This approach — sometimes called historical Monte Carlo or "backtesting retirement" — is one of the most widely used frameworks in retirement research. It does not predict the future. It measures the resilience of your plan against the full spectrum of economic conditions that have actually occurred since 1871, including depressions, world wars, oil shocks, hyperinflation, and financial crises.

Under the hood

How the historical simulation works

The simulation uses annual real (inflation-adjusted) US equity returns and inflation data going back to 1871, sourced from Robert Shiller's long-run dataset — the same data underlying the foundational 4% Rule research (Bengen 1994, Trinity Study 1998).

Step-by-step

1. The simulator takes every available starting year from 1871 to roughly (current year minus retirement length). Each starting year defines a unique "cycle."
2. For each cycle, it simulates your portfolio year-by-year, applying that era's historical equity return (blended with a fixed income return based on your bond type selection), subtracting your annual fees, and adjusting for inflation.
3. Each year, it calculates your spending need (after accounting for government income sources like Social Security or CPP/OAS), and subtracts the net withdrawal from the portfolio.
4. If the portfolio balance reaches zero before the retirement period ends, that cycle is counted as a failure. Otherwise it's a success.
5. The success rate is the number of surviving cycles divided by all cycles tested.

The blended return formula

Bond returns are drawn from the selected fixed income series (long-term Treasury, 5-year Treasury, or commercial paper), also from Shiller's dataset. The equity return reflects the S&P 500 / broad US market index going back to 1871.

Inflation adjustment

By default, spending is adjusted each year using the historical CPI from that same era's cycle, so your plan is tested against the actual inflation experienced during each historical period — including the severe inflation of the 1940s and 1970s. You can also choose PPI or a custom fixed rate.

The controls

Understanding the inputs

Annual spending

Enter your expected total annual expenses in today's dollars. The simulator will inflate this forward using historical data. Be honest — underestimating spending is one of the most common reasons real-world plans fail.

Portfolio value

Your total investable assets: index funds, ETFs, brokerage accounts, registered savings. Do not include your primary home, illiquid private equity, or assets you don't plan to draw from. Over-including illiquid assets is a common mistake.

Retirement length

If you retire at 40 and expect to live to 90, that's a 50-year retirement. It's better to overestimate — a plan that works for 45 years will also work for 35. The 4% Rule was calibrated for 30-year retirements; for longer ones, a 3–3.5% withdrawal rate is more conservative.

Spending model

Constant: Spending rises with inflation each year. Conservative and simple.

Bernicke: Based on research showing that real spending typically declines after age 56 ("the retirement smile"), reducing by about 2.5% per year until age 76. More realistic for many retirees but not universal.

% of portfolio: Withdrawal is a fixed percentage of remaining balance each year. You can never technically deplete the portfolio, but income can fall dramatically in bad markets.

Equity allocation

Research from Bengen and others suggests that for 30+ year retirements, portfolios with 50–75% equities historically outperform more conservative ones — counterintuitively. Very low equity allocations reduce long-term growth too much to sustain withdrawals. Very high allocations increase volatility risk.

Expense ratio

The annual cost of your investments. Low-cost index ETFs (e.g. Vanguard, iShares) typically run 0.03–0.18%. Actively managed funds can run 0.75–1.5%+. A 1% difference in fees compounds dramatically over decades — it can reduce a 30-year portfolio by 20–30%.

Canadian users

Canadian account types explained

TFSA — Tax-Free Savings Account

Contributions are made with after-tax dollars, but all growth and withdrawals are completely tax-free. This makes the TFSA the most tax-efficient account in retirement — it has no impact on income-tested benefits like OAS or GIS. Best practice: draw from TFSA first in retirement to allow RRSP/RRIF to continue growing tax-deferred.

2025 cumulative contribution room: $95,000 if eligible since inception (2009). Unused room carries forward. Withdrawals restore contribution room the following calendar year.

RRSP / RRIF — Registered Retirement Savings / Income Fund

Contributions reduce taxable income today; withdrawals are taxed as income. A powerful tool during high-earning years. However, the RRSP must be converted to a RRIF by December 31 of the year you turn 71, after which the government mandates minimum annual withdrawals (starting at ~5.28% at age 71, rising with age).

FHSA — First Home Savings Account

Available since April 2023. Contributions are tax-deductible (like an RRSP) and qualifying first-home withdrawals are tax-free (like a TFSA). Annual limit: $8,000. Lifetime limit: $40,000. Include any FHSA balance in your total portfolio value if you've already purchased a home or plan to convert it to an RRSP.

Non-registered accounts

Standard brokerage/investment accounts. Capital gains are taxed at 50% inclusion (i.e. half your gains are added to income). Dividends receive preferential tax treatment via the dividend tax credit. Consider drawing from non-registered accounts after TFSA but before RRSP/RRIF if in a lower tax bracket.

CPP / QPP — Canada / Quebec Pension Plan

A defined-benefit government pension based on your earnings history. The standard age to collect is 65, but you can take it as early as 60 (reduced by 0.6%/month) or defer to 70 (increased by 0.7%/month). Deferring to 70 gives a 42% higher benefit — a powerful longevity hedge if you're in good health.

OAS — Old Age Security

A flat monthly benefit available to Canadians aged 65+ who meet residency requirements. You can defer up to age 70 for a 7.2% increase per year deferred. OAS is subject to a clawback ("recovery tax") if your net income exceeds ~$90,000 (2025 threshold). Maximum OAS for 2025 is approximately $8,400/year.

Strengths

What this calculator is good for

Limitations in practice

What it is not good for

• Predicting what will actually happen to your portfolio — no model can do this
• Precise tax planning — it does not model marginal tax rates, RRIF minimums, OAS clawback, or capital gains at the household level
• Estate planning or bequest goals — the model optimises for survival, not maximising terminal value
• Non-US or non-Canadian market histories — the return data is US-based; Canadian equity returns and exchange rate effects are not separately modelled
• Accounting for major life changes (divorce, disability, long-term care costs)
• Modelling a guaranteed annuity income stream accurately
• Replacing a comprehensive financial plan built with a qualified advisor

Assumptions

Key limitations & assumptions

US equity data only

The equity return series is based on the US stock market (Shiller S&P 500 data). US markets have historically been among the strongest in the world — a diversified international portfolio might perform differently. The "home country bias" of this dataset means success rates may be slightly optimistic for non-US investors or globally diversified portfolios.

No sequence correlation

Each historical cycle is independent. In reality, markets are partially autocorrelated — a bad decade tends to be followed by recovery, and vice versa. The simulator does not model mean reversion directly, though the use of real historical sequences implicitly captures the correlations that existed in each era.

Fixed asset allocation

The simulation assumes you maintain your chosen equity/bond split throughout retirement. In practice, many people reduce equity exposure with age (e.g. target-date funds, "glide paths"). This can reduce volatility but may also reduce long-run success rates, as per Bengen's original research.

Spending is deterministic

The model does not account for unexpected large expenses: healthcare, home repairs, supporting adult children, or long-term care. These can be significant and are not reflected in a constant spending assumption. Consider adding a buffer.

No taxes on withdrawals

The simulator does not deduct income tax from portfolio withdrawals. RRSP/RRIF and traditional 401(k)/IRA withdrawals are taxable. If a large portion of your portfolio is in pre-tax accounts, your effective spendable income is lower than the gross withdrawal — factor this into your spending figure.

Government benefits in today's dollars

CPP, OAS, and Social Security amounts are entered in today's dollars and inflation-adjusted forward. The simulation does not model potential future benefit cuts, changes to clawback thresholds, or policy reform. These are real risks worth considering.

Results

Interpreting your success rate

Why 100% isn't the goal

Aiming for a 100% historical success rate requires a withdrawal rate so conservative (often below 2.5–3%) that it likely means dying with a very large unspent estate. Most researchers suggest 90–95% is the rational target — it provides strong protection while allowing a reasonable standard of living.

The median final balance

The median balance across all surviving cycles shows how much your portfolio would likely be worth at the end of your retirement horizon. A high median balance suggests you may be over-saving, or that your plan has room to absorb higher spending, unexpected costs, or legacy goals.