The Richer Retirement Portfolio by William Bengen aims to elevate the old 4% rule by expanding the one’s asset allocation to modern asset options.
Asset Allocation
| % | Asset Class |
|---|---|
| 22% | Large Cap Blend Stocks¹ |
| 22% | Small Cap Blend Stocks² |
| 11% | International Large Cap Blend Stocks |
| 40% | Intermediate Term Bonds |
| 5% | Treasury Bills |
Asset Notes
1. Bengen specifically recommends 11% large cap blend and 11% mid cap blend. Since I don’t have data for mid caps, I grouped them into the large cap allocation. Note that most large cap funds already cover mid caps.
2. Bengen specifically recommends 11% small cap blend and 11% micro caps. Since I don’t have data for micro caps, I grouped them into the small cap allocation.
Performance
Change the home country to translate the portfolio to local assets, currency, and inflation.
Author
Bill Bengen
Bill Bengen is an MIT-educated financial advisor most well-known for quantifying the original 4% rule for retirement. You can read about the Richer Retirement Portfolio in his book by the same name.
Overview
As the original creator of the ubiquitous “4% rule” for retirement that so many investors today take for granted, Bill Bengen has always been in a strange position. On the one hand, his ability to convince an entire generation of retirement planners that effective backtesting is highly important must surely be a pride point. But on the other, Bill has always been refreshingly candid about the limits of his assumptions. And even he will tell you that there’s more to retirement planning than just building your life around a single number without looking deeper.
The Richer Retirement portfolio is named after the book in which he aims to expand upon his classic retirement insights. A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More is more than just a treatise on the benefits of expanding his analysis to assets not before considered. It’s a full guide to withdrawal strategies, tax management, and planning in general with the ultimate goal of putting your money to the best use possible to empower a better life.
While the original 4% rule was based on data from US stocks and intermediate term bonds, the Richer Retirement portfolio not only expands the playing field to various sizes of stocks but also looks beyond US shores to the benefits of international investing. By taking the Classic 60-40 framework and simply subdividing the stock portion to multiple modern options while adding a dash of practical cash, the benefits to safe withdrawal rates are unmistakable. It’s a great new addition to a solid investing foundation for any retiree.
Bengen fans may notice that the asset allocation listed here is a little simpler than the one outlined in his book. He advocates for equal parts large, mid, small, and micro caps, while I simplified it to equal parts large and small caps to match my available data. You can see in the Withdrawal Rates chart that the 4.8% 30-year SWR is virtually identical to the 4.7% SWR he calculated for his specific recommendation. So no matter which version you choose, you should be in the same ballpark.
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Alternatives
Portfolios with a similar structure or design intent
Classic 60-40 — The original idea that the Richer Retirement portfolio builds upon.
Three-Fund Portfolio — Similar concept with international diversification but no small caps.
No-Brainer Portfolio — Same choice of stocks in equal weight with short term bonds.