Three Funds Portfolio: how to retire safely

Last Update: 30 April 2024

The Bogleheads Three Funds Portfolio invests in 3 asset classes and is allocated for 80% on Stocks.

In the period May 1974 - Apr 2024, the portfolio granted a 9.74% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 5.941% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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: April 2024), the portfolio has returned 7.7% annualized, with a maximum drawdown of -44.88%.

6.775% has been a safe withdrawal rate.

Let's consider different timeframes, all ending at April 2024: which Withdrawal Rates could you have applied without running out of money in your retirement?

The Withdrawal Rates calculated here are annualized and refer to the initial capital (not the current!). The first month withdrawal is 1/12 of that annualized withdrawal and it's adjusted for inflation for each subsequent month.

A Perpetual Withdrawal Rate (PWR) protected the original inflation adjusted capital.

A Safe Withdrawal Rate (SWR) didn't protect the original capital, but the portfolio didn't run out of money during retirement. The portfolio went to zero exaclty at the end of the retirement period.

Learn more about Withdrawal Rate simulation
Swipe left to see all data
Timeframes ending at Apr 2024
Withdrawal Rate (%)
Investment Performances
Timeframe Period from Period to Perpetual Safe Ann.Return(%)
[ Infl.Adj. ]
Max
Drawdown(%)
10 Years 1 May 2014
30 Apr 2024 4.523 12.665 7.48
[ 4.52 ]
-23.16
Jan 2022 - Sep 2022
20 Years 1 May 2004
30 Apr 2024 4.722 7.708 7.57
[ 4.85 ]
-44.88
Nov 2007 - Feb 2009
30 Years 1 May 1994
30 Apr 2024 5.217 6.775 7.70
[ 5.02 ]
-44.88
Nov 2007 - Feb 2009
40 Years 1 May 1984
30 Apr 2024 8.544 9.322 9.41
[ 6.41 ]
-44.88
Nov 2007 - Feb 2009
50 Years 1 May 1974
30 Apr 2024 5.411 5.772 9.74
[ 5.70 ]
-44.88
Nov 2007 - Feb 2009
Simulations are calculated with actual returns of Bogleheads Three Funds Portfolio | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Portfolio is rebalanced each month | Inflation is updated at April 2024

Withdrawal Rates Simulation (updated at Apr 2024)

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?

Methodology and Definitions
The algorithm calculates the chance of success of a initial withdrawal rate, whose amount in dollars is adjusted monthly for inflation. The algorithm tries a retirement simulation, starting at every possible month in the given period.
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 Withdrawal Rates calculated here are annualized and refer to the initial capital (not the current!). The first month withdrawal is 1/12 of that annualized withdrawal and it's adjusted for inflation for each subsequent month.

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.

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.

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.

Period: May 1974 - Apr 2024
Swipe left to see all data
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 10 Years
Worst Period (from)
0.000
Nov 1998
0.376
Mar 1999
3.729
Mar 1999
6.444
Apr 2000
8.624
Apr 2000
9.918 10.725 11.549 13.353
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 7.546 8.543
30 Years
Worst Period (from)
4.530
Sep 1987
4.882
Sep 1987
5.235
Sep 1987
5.588
Sep 1987
5.941
Sep 1987
6.291 6.559 6.791 7.576
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Simulations are calculated with actual returns of Bogleheads Three Funds Portfolio | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Portfolio is rebalanced each month | Inflation is updated at April 2024

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.

Period: May 1974 - Apr 2024
Swipe left to see all data
Withdrawal
Rate
10 Years
10 Years
20 Years
20 Years
30 Years
30 Years
% Success Percentile % Success Percentile % Success Percentile
2.00 %
100.00
100.00
100.00
2.50 %
100.00
100.00
100.00
3.00 %
100.00
100.00
100.00
3.50 %
100.00
100.00
100.00
4.00 %
100.00
100.00
100.00
4.50 %
100.00
100.00
100.00
5.00 %
100.00
100.00
100% Succ.
5.243%
100.00
5.50 %
100.00
98.34
95% Succ.
5.912%
100.00
100% Succ.
5.941%
6.00 %
100.00
93.63
99.59
95% Succ.
6.291%
6.50 %
100.00
90.03
90% Succ.
6.503%
92.95
90% Succ.
6.559%
7.00 %
100.00
86.43
70.95
7.50 %
100.00
80.61
80% Succ.
7.546%
52.70
50% Succ.
7.576%
8.00 %
100.00
69.81
43.57
Simulations are calculated with actual returns of Bogleheads Three Funds Portfolio | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Portfolio is rebalanced each month | Inflation is updated at April 2024

Related Pages

For the Bogleheads Three Funds Portfolio, we have prepared a report for each available timeframe:
10-Year    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