TIP$TER’s simulation engine projects the cumulative “shortfall risk” of your portfolio. This is the estimated probability that an investor or his or her spouse, if any, will outlive the portfolio.
TIP$TER’s estimated shortfall risk is the combination of the risk of the investors' portfolio running out before the targeted portfolio duration while they are still alive, plus the risk that the investor or his or her spouse, if any, outliving your targeted portfolio duration.
If an investor chooses a targeted portfolio duration that is simply equal to his/her and his/her spouse’s combined life expectancy, the “shortfall risk” is likely to exceed 50%, because there is at least a 50% chance that the investor and his or her spouse would exceed that life expectancy.
TIP$TER’s shortfall risk estimate takes you and your spouse’s life expectancies into account, both before and after your targeted portfolio duration. To the extent that a simulated shortfall occurs near the end of a long simulated period, the reduced likelihood of you or your spouse being alive at that time reduces the computed shortfall risk. To the extent that your targeted portfolio duration is too short, the likelihood of you or your spouse outliving that period increases the computed shortfall risk.