Historical return data vs monte carlo simulations to estimate probability of success

Is it factoring anything for Social Security?

Another way to look at your question is what do historical returns tell us in terms of success odds vs Monte Carlo? Using only backtesting (historical returns) for success odds assumes future sequence of returns risk will be no worse than the past. That isn't a completely solid assumption, though, because "past performance is not indicative of future results" (the US SEC required disclaimer on any forward looking financial statements by regulated entities). So could be overly optimistic.

Consider that investment markets of only a few countries in the world generate high Safe Withdrawal Rates (SWRs) and most are lower: Caution for non-US FIRE adherents: Safe Withdrawal Rates based on simple portfolios vary considerably by country, and are much lower in many countries

On the other hand, Monte Carlo simulations are likely overly pessimistic as they generate completely uncorrelated scenarios that are highly unlikely to occur in reality.

So, likely somewhere in between success rates generated by backtesting and generated by Monte Carlo simulations would match actual likelihood of success.

This week's episode of ChooseFI (ep. 566) has an extensive discussion about the assumptions that go into these sorts of simulations, what the results mean, as well as some discussion of the pros and cons of Monte Carlo versus historical analysis. I highly recommend listening to the episode.

Monte Carlo simulations will always be more conservative than worst case historic returns. As to how to remain cautious without going overboard (keeping in mind that I am not a financial advisor and this is not financial advice), you may want to consider the EarlyRetirementNow SWR toolkit (referenced in the below links). It uses worst case of backtested historic returns and forward capital market assumptions (based on current CAPE valuations), as well as your own planned cashflows to calculate individualized SWR/SCR (Safe Consumption Rate, which is SWR + cashflows). I would also recommend reading:

The default (baseline starting point) SWR (Safe Withdrawal Rate) for FIRE should be 3%-3.5%, not 4% (29X-33X, not 25X)!

and at least one of:

Safe Withdrawal Rates for Early Retirees

or

Safe Withdrawal Rates, Drawdown Strategies, RMDs and 50 Year FI Timelines

which all address realistic SWRs for FIRE timeframes, and will reduce the gap somewhat between backtesting and Monte Carlo analysis.

I like Portfolio Charts for this, though I don't know that they have a way to generate your own portfolio and back test it. It was helpful to see the charts of the historical performance of their sample portfolios, though!