Pacific Coast Society of Orthodontists Bulletin Spring 2021 - 56

Corners of the PCSO

▫▫ If things go better than expected: How will

you respond? Will you shift your investment
portfolio to safer assets so you don't lose what
you've already achieved? Or, if you are a highly
confident risk taker, you may decide to stretch
for even more wealth than you might have
originally planned for.

Either way, Monte Carlo simulation can give you
a measuring stick against which to gauge your
personal goals, so that, over time, you can confidently earn, save, spend, and invest in the market
at levels that make best sense for you.

▫▫

Monte Carlo Simulation: A Tool, Not a Toy
Mind you, Monte Carlo simulation is neither
perfect nor fail proof.

▫▫ There are still no crystal balls: Like any as-

▫▫

▫▫

sessment of the future, Monte Carlo results
remain only a well-educated guess. And even
the best-constructed simulation is expected to
be meaningful only 20 years into the future. In
other words, if you try to run a reliable simulation when you are in your early 30s and you
plan to work until your 65, you may as well flip
a coin instead to determine possible outcomes.
Garbage in, garbage out: If the inputs are way
off base, the outputs will be, too. For example,
if you vastly overestimate or underestimate
the amount you plan to spend in retirement,
your results may not be as true to life as they
need to be.
Not all Monte Carlo simulation software is created equal: As is often the case, some Monte
Carlo software products are considerably better
than others at meeting the challenge with
which they've been charged. A product that
is easier to learn and/or cheaper to purchase
may run fewer scenarios or require fewer, more
simplistic inputs - with less reliable results.

It thus pays to work with a dental CPA or wealth
advisor who:

▫▫ Understands your input variables: Your dental
CPA or wealth advisor should have a seasoned track record for helping clients arrive at
the most reliable, detailed estimates for the
input numbers involved, with a good, up-todate grasp of factors such as Social Security,

56	

▫▫

tax-effective retirement plan withdrawal rules,
actuarial tables, and more. It also helps to work
with an advisor who has specific, hands-on
experience working with orthodontists, so he or
she has a thorough understanding of how and
where your sources of wealth are earned and
spent within your practice as well as all the variables inherent in the transition of your practice.
Understands the software: You want to find
an advisor whose team is technologically
capable of using the more robust Monte
Carlo simulation software programs available. While they are more complex and often
more expensive, they also are more powerful,
allowing for more granular details, and are
capable of running the thousands of iterations that will yield the most real-life results.
Our office relies on Wagner Math Finance RSP
3 software. It's neither pretty nor all that easy
to use, but we've found it to be an extremely
powerful simulator in the right hands.
Understands the results: As touched on above,
once you've arrived at your estimated odds for
surviving or thriving in retirement according
to your individual goals and risk tolerances, it
helps to have an advisor who is experienced at
walking you through the many what-ifs that
the future still holds for you and your practice.
By having specific plans in place in advance of
actual outcomes, you stand the best chance to
respond objectively and effectively in the face
of the unexpected.

Among my favorite financial authors is William
J. Bernstein, MD, a neurologist who turned to
wealth management later in life. In a 2012 interview with Reuters, he observed, " We don't expect
people to fly their own airplanes or take out their
kids' appendixes, and yet we expect them to manage their retirement portfolios. In my careers I've
done all three, and investing is by far the hardest. "
Personally, I have yet to remove anyone's appendix,
but I have flown my own planes. Even with this
partial experience, I am confident that Dr. Bernstein is correct in his assessment. It's why I believe
a qualified advisor applying robust Monte Carlo
simulation software can be a valuable ally as you
plan for your retirement dreams to take flight.

PCSO Bulletin    Spring 2021



Pacific Coast Society of Orthodontists Bulletin Spring 2021

Table of Contents for the Digital Edition of Pacific Coast Society of Orthodontists Bulletin Spring 2021

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