Also called: Probability of ruin, Failure rate.
Ruin rate is the complement of the probability of success, and it is usually the more useful framing because it puts the failure in view. "95% success" reads like a pass. "One in twenty of these futures ends with no money at age 88" reads like a decision.
The number is sensitive to the definition of ruin. Some models count a plan as ruined the moment the balance touches zero, even if that happens in the final year with a paid-off house and a state pension still arriving. Others require a shortfall against essential spending. The second is closer to what people mean by running out.
It is also sensitive to the horizon. A 5% ruin rate over 30 years and a 5% ruin rate over 40 years describe very different plans, and quoting one without the other is close to meaningless.
Treat a ruin rate as a comparison instrument rather than a forecast. It is excellent for judging whether one policy is more robust than another under identical assumptions, and poor as a literal probability that your own retirement fails.
Research on this
See also
- Probability of success — The share of simulated runs in which a plan funds its spending through the full horizon without exhausting the portfolio.
- Safe withdrawal rate — The share of a portfolio’s starting value you can withdraw in year one of retirement, then raise with inflation each year, without running out over your horizon.
- Monte Carlo simulation — Running a plan through thousands of randomly generated market sequences to report a distribution of outcomes, instead of one path from an average return.