High interest rates & 60/40: How you can benefit from the current conditions in retirement

High interest rates & 60/40: How you can benefit from the current conditions in retirement

According to a report by www.aktienwelt360.de,which talks about current interest rates and their impact on retirement, the 60/40 ratio (60% in stocks and 40% in bonds or short- to medium-term products) could represent an opportunity for investors. A scientific calculation shows that such a portfolio has never failed with an annual withdrawal of 4% for 30 years.

The last few years have been characterized by low interest rates and bond yields, which is why the 60/40 ratio was considered unattractive. However, there is now an opportunity to use this ratio again and benefit from the current high interest rates.

As an economist, I believe it may make sense to give the 60/40 ratio a chance in retirement. Depending on your assets, the allocation could also be structured differently, for example in favor of stocks, in order to maximize the return potential. Due to the high interest rates, we can now receive returns on the capital invested again, both in short and medium-term investment products. In addition, the return potential of stocks is likely to have increased again due to the lower valuations.

The portfolio can remain stable because we can achieve a secure return with 40% in overnight money, fixed-term deposits or bonds. With conservative and safe bonds we could potentially even get over 4% return per year. This part of the portfolio offers stability and predictable returns, as interest income is considered a risk-free option.

However, we must not forget that inflation remains high and can affect the returns on our investments. Nevertheless, it is better to earn returns on the capital invested than to have interest-free cash and invest everything in stocks. In retirement we need flexibility and the distribution of capital can be adjusted, for example by dividing it into the currently best conditions of overnight money, fixed-term deposits and bonds.

In summary, investors can continue to benefit from stocks in retirement. The 60/40 ratio allows us to adjust our strategy and generate returns from current interest rates. It would be negligent not to take advantage of this opportunity to maximize flexibility and returns in retirement.