What does the Historical Analysis chart show how can it be used in planning?
What does the Historical Analysis chart show how can it be used in planning?
Last published on: August 29, 2025
Video: Historically Possible Incomes Chart
Video Transcript
this video walks you through the
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historically
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possible incomes chart in this chart
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income lab has cloned
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the household and put them at every
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single month
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in recorded history which for us dates
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back to
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1871. the chart shows how much
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income would have been available to this
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household at exactly
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this point in life at each point in time
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any change in the household or the plan
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like changes in longevity assumptions
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cash flows income path investment
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amounts and allocations
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or legacy goals will result in a change
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to this chart since this is based
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on historical data the income numbers
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shown here
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give important insight into how much
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income a household
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could have had in realistic
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circumstances
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as you can see income varies greatly
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depending
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on where we find ourselves in history in
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the mid-1960s
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the period that gave us the well-known
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four percent rule
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income for this household would have
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been quite low
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whereas in the 1980s income was
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materially higher
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next you can see parts of the graph have
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been grayed out
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these are periods in history that are
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least like today
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in economic terms the blue periods on
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the other hand
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have more in common with today's market
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and economic conditions for example
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1982 happened to be nothing like what
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we're experiencing today
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at that time we had high inflation
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high interest rates low equity values
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and so on so using 1982 as a proxy for
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retirement today
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is not very useful it's also important
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to note that this video
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was recorded in june 2020
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so the blue periods may change on when
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you are watching
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this video the red horizontal line
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shows the household's minimum or
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essential
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income level the green line indicates
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the desired
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income level the black line is the
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proposed
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monthly income this graph
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is a great way to point out to clients
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how much income a household
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just like theirs was able to have in the
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past and how it compares
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with the income they desire or
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absolutely need
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this should give clients a feeling of
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how aggressive
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or conservative their plan is for
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example
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if their desired income is lower than
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what was available
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in many or most historical periods they
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may feel comfortable
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about the conservative nature of the
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plan
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now could the future be worse than
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anything experienced in the past
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of course but it's also important to
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point
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out that this graph does include some
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very bad periods like two world wars
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the spanish flu the great depression
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and so on in conclusion
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this chart can help give clients context
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and understanding surrounding their
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income plan
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and in many cases it can help reassure
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them
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and give them confidence thank you
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for viewing this video give it a like if
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you thought it was helpful
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and share any feedback in the comments
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below
Historical Context & Sequence of Returns
The Historical Analysis chart shows the monthly income level, in today’s dollars, that could have been supported under a given plan from each point in recorded history. This data answers the question,
“If a household had the same longevity expectations, income risk preferences, non-portfolio income sources, spending expectations, etc. and experienced historical sequences of returns and inflation, what could they have afforded to spend?"
This data provides a perspective on the range of incomes that we now know, with the benefit of hindsight, would have been possible in the past.
This graph shows the effects of sequence-of-returns and sequence-of-inflation risk: some historical periods could have supported high income levels due to beneficial sequences of returns (high returns, especially early in the retirement portion of the plan) and low inflation. Others would have supported lower income levels. This graph helps advisors and clients understand the range of incomes across this range of history, which can help both to understand the uncertainty of a given plan and how a given plan's income level stacks up against past possibilities.
Economic Context
Furthermore, using the Economic Context slider below this graph, you can grey out historical points that were most unlike the present. For example, if the slider is set at High Context, two-thirds of historical periods (those least like today in economic terms) will be greyed out. This color coding allows you to have a conversation with clients about how the income in periods most like the current economic and market situation compared to other historical periods. The blue areas on the graph will then allow you to focus on economic times that are most relevant for today's retirees and use it as a reference point for future planning.
You can also discuss how income would have differed at various well-known periods, such as the Great Depression, World War II, or the 1970s period of stagflation.
You can also toggle annotations of historical recessions on and off of this graph.
The graph of historically possible incomes also illustrates how a household’s Proposed, Desired and Minimum monthly income levels (shown as horizontal lines) compare to what people were able to achieve in the past. Though past outcomes do not guarantee future results, this context helps households understand where their goals stack up compared to history.