Last Update: 30 November 2023
The Bogleheads Three Funds Portfolio invests in 3 asset classes and is allocated for 80% on Stocks.
In the period Dec 1973 - Nov 2023, the portfolio granted a 9.5% annualized return, with a -44.88% maximum drawdown.
Key Points
Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 5.855% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.
With a 4% withdrawal strategy, you would have lived on your investiment for 30 years in the 100% of cases.
In this post we will find out the most affordable withdrawal strategies for the Bogleheads Three Funds Portfolio. All calculations are made on actual historical series.
You can implement the portfolio, let it passively follow the market trend, and in the meantime you can periodically withdraw a portion of it for your retirement.
The Bogleheads Three Funds Portfolio
The Bogleheads Three Funds Portfolio contains 80% Stocks, 20% Bonds.
| Weight | Asset Class | Category |
|---|---|---|
| 50.00 % | Total US Stock Market | Stocks |
| 30.00 % | All World ex-US Stock Market | Stocks |
| 20.00 % | Total US Bond Market | Fixed Income |
Over the last 30 years (last update: November 2023), the portfolio has returned 7.57% annualized, with a maximum drawdown of -44.88%.
6.806% has been a safe withdrawal rate.
Let's consider different timeframes, all ending at November 2023: which Withdrawal Rates could you have applied without running out of money in your retirement?
Timeframes ending at Nov 2023 |
Withdrawal Rate (%) |
Investment Performances |
||||
|---|---|---|---|---|---|---|
| Timeframe | Period from | Period to | Perpetual | Safe | Ann.Return(%) [ Infl.Adj. ] |
Max Drawdown(%) |
| 20 Years |
1 Dec 2003 |
30 Nov 2023 | 4.695 | 7.762 |
7.47 [ 4.75 ] |
-44.88 Nov 2007 - Feb 2009 |
| 30 Years |
1 Dec 1993 |
30 Nov 2023 | 5.200 | 6.806 |
7.57 [ 4.93 ] |
-44.88 Nov 2007 - Feb 2009 |
| 40 Years |
1 Dec 1983 |
30 Nov 2023 | 7.744 | 8.535 |
9.12 [ 6.13 ] |
-44.88 Nov 2007 - Feb 2009 |
| 50 Years |
1 Dec 1973 |
30 Nov 2023 | 4.783 | 5.153 |
9.50 [ 5.41 ] |
-44.88 Nov 2007 - Feb 2009 |
Withdrawal Rates Simulation (updated at Nov 2023)
During your retirement, tipically you want to divest periodically some amount of money from your portfolio, without running out of money over a long period.
Based on how long your retirement is, what would it be an acceptable withdrawal rate, for the Bogleheads Three Funds Portfolio?
For instance, assuming a 20 years retirement, the algorithm will cover each 20 year timeframe starting at every possible month in the given period between the start and end month.
Here's how simulations work (each simulation is based on actual asset class returns, in US dollars):
- At the beginning, you start with a certain amount of money invested in the portfolio (i.e. the initial invested capital).
- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.
- Each month, portfolio value is updated, based on the asset classes returns (dividends are supposed to be reinvested).
- Each month, portfolio is rebalanced, to reset to the original weight of the assets (applicable only if portfolio contains at least 2 assets).
- Each month, the withdrawal is adjusted for inflation (US Inflation is used for simulation).
The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too. In this website, you can find PWRs with 100% Capital Protection, or less.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money. In this website, you can find SWRs with 100% Success rate, or less.
Learn more about Withdrawal Rate simulation
Data Sources and Credits
In the table below, we analyze different key withdrawal rates, based on the length of retirement. To focus on a specific timeframe for this portfolio, click on the links in the table.
|
PWR (%) - Perpetual Withdrawal Rate
|
SWR (%) - Safe Withdrawal Rate
|
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Preserved Capital (Infl.Adj) | 100% | 75% | 50% | 25% | 0% | 0% | 0% | 0% | 0% | ||
| Success Rate | 100% | 100% | 100% | 100% | 100% | 95% | 90% | 80% | 50% | ||
| Timeframes |
20 Years Worst Period (from) |
1.945 Apr 2000 |
2.770 Apr 2000 |
3.594 Apr 2000 |
4.419 Apr 2000 |
5.243 Apr 2000 |
5.912 | 6.503 | 7.516 | 8.543 | |
|
30 Years Worst Period (from) |
4.530 Sep 1987 |
4.882 Sep 1987 |
5.235 Sep 1987 |
5.588 Sep 1987 |
5.855 Dec 1973 |
6.208 | 6.521 | 6.784 | 7.576 | ||
Withdrawals and Success Rate
If you had implemented a specific Withdrawal Strategy with the Bogleheads Three Funds Portfolio, which would have been the success rate so far?
Simulations follow the same rules mentioned before. Withdrawals are expressed as yearly rates and refer to the initial capital. After that, withdrawal amount is monthly adjusted for inflation.
Success rates are calculated over all the past timeframes available in the data source. To focus on a specific withdrawal rate, click on the links in the table.
| Withdrawal Rate |
20 Years
|
30 Years
|
||
|---|---|---|---|---|
| % Success | Percentile | % Success | Percentile | |
| 2.00 % |
100.00
|
100.00
|
||
| 2.50 % |
100.00
|
100.00
|
||
| 3.00 % |
100.00
|
100.00
|
||
| 3.50 % |
100.00
|
100.00
|
||
| 4.00 % |
100.00
|
100.00
|
||
| 4.50 % |
100.00
|
100.00
|
||
| 5.00 % |
100.00
|
100% Succ. 5.243% |
100.00
|
|
| 5.50 % |
98.34
|
95% Succ. 5.912% |
100.00
|
100% Succ. 5.855% |
| 6.00 % |
93.63
|
98.34
|
95% Succ. 6.208% |
|
| 6.50 % |
90.03
|
90% Succ. 6.503% |
91.29
|
90% Succ. 6.521% |
| 7.00 % |
85.32
|
70.95
|
||
| 7.50 % |
80.33
|
80% Succ. 7.516% |
52.70
|
50% Succ. 7.576% |
| 8.00 % |
69.81
|
43.57
|
||
Related Pages
For the Bogleheads Three Funds Portfolio, we have prepared a report for each available timeframe:
20-Year
30-Year
if you want to learn more about the statistics of a specific withdrawal rate, we suggest these in particular:
2%
2.5%
3%
3.5%
4%
4.5%
5%
Website Homepage:
BestRetirementPortfolio.com