How does the simulation engine behind ProjectionLab work and how do I interpret results?

ProjectionLab operates by simulating a full year (365 days) and manages excess income or required drawdowns from relevant items in your plan for that year, including income, withholding, expenses, debt payments, dividends, taxes due from the previous year, required minimum distributions (RMDs), assets that generate rental income, and more.

Yearly surplus or shortfall is computed automatically, so you don’t manually define what is saved as you might in a simpler retirement calculator. The following example walks through a scenario with real numbers to show how the simulation engine works.

Example Scenario

For this example, assume you have the following plan:

• $65,000 in salary annually
• $10,000 from a side hustle annually
• 3% of your salary invested in a Traditional 401(k)
• $50,000 in living expenses per year
• Taxes set to default settings for Massachusetts, USA
• Display Options > Inflation set to show projections in Today’s Currency

Sankey View

To see a breakdown of your income, inflows, and outflows, navigate to the Sankey view by clicking Cash Flow, located between Plan and Tax Analytics at the top of your screen.

For this example, the Sankey view shows the following from left to right:

• $65K salary annually in the first year
• $10K side hustle annually in the first year
• $75K total Earned Income
• $17.66K Tax Withholding, broken down by income stream:
  • $15.30K Withholding: Salary
  • $2.35K Withholding: Side Hustle
• $57.34K Inflows (total Earned Income minus Tax Withholding)
• $50K Expenses
• $1.95K Tax-deferred (your 401(k) contribution)
• $5.39K Cash (goes to Cash Savings if Flows are set to Save Anything Leftover)

You can adjust inputs like your 401(k) contributions, earned income, or expenses to see how the simulation changes.

Year-by-Year Output

Simulation output is reported on a year-by-year basis. Most plots start with a data point representing where you are today, then show one point per year going forward.

For example, if you’re 35 now and making a plan that projects from “now”, you’ll see a data point for today, then one for age 35-36 (the first simulated year), then 36-37, and so on. On the stacked bar charts, each bar is a year-end snapshot. Click any bar to open the yearly summary, where you can dig into exactly what happened that year. That view helps answer a lot of questions about how the simulation works.