Historical Return Sequence Audit
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A retirement stress-testing technique that runs a proposed portfolio through actual historical return sequences (e.g., retiring in 1929, 1930, 1931, etc.) to show which scenarios would have been successful, targeting approximately 95% success across all historical periods.
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What creators say
“The third of the three retirement readiness tests is a historical audit that Asset Dedication runs based on the particular income ladder and growth portfolio that we've proposed. They run that through as if the client retired, for example, in 1929 and then 1930 and then 1931, and you get this yellow squiggly line that represents every path their assets would have taken. We want typically about a 95% success rate across the whole span for that particular test.”
How Dana uses it Hide
- Uses it for
- Third retirement readiness test at Strategy Three meeting — stress-testing the proposed specific portfolio against all historical return sequences to confirm durability
- Likes
- Uses actual real-world historical scenarios rather than simulated ones; real-life outcomes generally better than Monte Carlo projections; builds client confidence by showing the plan survived even the Great Depression era
- Compared with
- Complements Monte Carlo (which overstates tail risks) with actual historical data; provides more concrete confidence than Monte Carlo alone
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