Investing your Altersvorsorgedepot more safely as retirement nears (rebalancing)

Tilman Freyenhagen

Published on 14 June 2026 · Updated on 7 August 2026 · Managing Director & Partner, Alsterspree Verlag GmbH

Sequence-of-returns risk: why the Altersvorsorgedepot needs protection shortly before retirement

The closer your planned retirement gets, the more sensitively your Altersvorsorgedepot reacts to market swings. So-called sequence-of-returns risk describes the danger that a severe market crash immediately before or at the start of the payout phase permanently reduces the account's value, because there is no longer time left for prices to recover. Anyone who does not deliberately reduce risk during this phase risks a noticeably lower monthly top-up pension.

During the accumulation phase, the Altersvorsorgedepot benefits from compound interest over decades. But shortly before retirement, the account has usually reached its maximum size. A percentage loss of, say, 30 percent weighs far more heavily in absolute terms — 60,000 euros — on an account balance of 200,000 euros than it would in the early years. If the crash happens shortly before withdrawals begin, more units have to be sold at lower prices in retirement to cover the desired payout^[1]. This can drastically shorten how long the remaining capital lasts.

To cushion this effect, it is advisable to gradually reduce the equity share (a so-called glidepath). In the new Altersvorsorgedepot from 2027, this rebalancing from equity ETFs into lower-volatility assets such as money-market or bond ETFs is, helpfully, completely tax-free, because any gains are only taxed on final payout. The subsidy calculator also lets you simulate the long-term effects of taxation and state support.

Note: this example allocation is for illustration only and does not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

The glidepath principle: how gradual risk reduction works in the account

The closer retirement gets, the more important it becomes to gradually make your personal Altersvorsorgedepot safer. By gradually rebalancing from broadly diversified equity ETFs into lower-volatility assets such as bond ETFs or money-market products (a so-called glidepath), you reduce the risk of being hit by a drastic market downturn shortly before you start drawing your pension. In the new Altersvorsorgedepot from 2027, this risk reduction is, unlike in a regular securities account, completely tax-free, because any gains are only taxed in the later payout phase. You should typically start this process around five to ten years before your planned retirement, so you can benefit from a plannable portfolio structure.

Sequence-of-returns risk in focus

The mathematical background to this rebalancing is so-called sequence-of-returns risk (SoRR). This risk means that the order in which returns occur in the first years of the payout phase has a decisive influence on how long the account's capital ultimately lasts^[2]. If you experience a severe market crash right at the start of your retirement and simultaneously have to sell units, your capital shrinks disproportionately fast. A predefined glidepath protects you from such emotionally driven mistakes and panic selling. For deeper strategic guidance, our Altersvorsorgedepot guide offers detailed step-by-step instructions.

This example allocation shows how the risk is continuously reduced. Many modern Altersvorsorgedepot providers let you handle this adjustment via automatic target date funds (lifecycle funds), where the fund management steers the glidepath on its own. Alternatively, you can carry out the rebalancing manually and cost-optimised as part of your own investment strategy. Note: the figures are for illustration only. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

The tax trump card of the Altersvorsorgedepot: rebalancing without painful deductions

As you approach retirement, protecting the capital you have built up becomes one of the most important tasks. From 2027, the new Altersvorsorgedepot lets you rebalance your assets gradually and, crucially, completely tax-free (the glidepath principle), to minimise the risk of short-term price losses before retirement. Unlike in a regular securities account, selling equity ETFs and then buying lower-volatility assets such as money-market ETFs within the Altersvorsorgedepot triggers neither the flat-rate withholding tax (Abgeltungsteuer) nor tax on the advance lump-sum (Vorabpauschale)^[3].

This tax deferral considerably boosts the compound-interest effect during the critical phase shortly before retirement. Because gains are only taxed on later payout, the entire capital stays invested during the rebalancing phase and can keep working for you^[4]. If you want to know how state support and tax-free returns affect your personal pension, our neutral subsidy calculator can help with a detailed calculation. For deeper detail on the legal framework, it is also worth looking at the knowledge section.

This gradual reduction protects you from so-called sequence-of-returns risk — the risk that a market crash immediately before you retire decimates your savings. Please note: the table above serves only as an illustrative model for orientation and does not constitute individual investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.

The optimal equity allocation by age: guidance for the transition phase

The closer retirement gets, the more important it becomes for investors to gradually make their own Altersvorsorgedepot safer, to cushion so-called sequence-of-returns risk. This risk describes the danger that a severe market downturn directly before or at the start of the payout phase massively affects the long-term pension amount. By successively and systematically rebalancing from more volatile equity ETFs into lower-volatility forms of investment such as bond ETFs, government bonds or safe money-market products, you protect the assets you built up over decades from such losses in good time. In the new Altersvorsorgedepot (AVD), this risk-reducing transition is fully tax-free from 2027, because gains are only taxed on final payout in retirement^[5].

The planned transition: gradually lowering the risk

A well-established method for those close to retirement is the so-called glidepath principle (a lifecycle strategy). Instead of abruptly liquidating the entire account at retirement and risking a poorly timed exit from the market, you gradually lower the risk over the last ten years before the planned payout. This prevents a sudden market crash shortly before retirement from drastically reducing the value of the capital you worked hard to build up. While a regular securities account is hit by the Abgeltungsteuer at every rebalancing step, this process remains tax-neutral within the state-subsidised Altersvorsorgedepot. The table below gives you practical guidance for this gradual transition.

Note: this allocation is for orientation only and does not constitute investment advice (not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG). Reducing the equity allocation too quickly can diminish your long-term return potential, while acting too late increases the risk of loss. You can find detailed analyses and source-based guides on this topic in our knowledge section. To calculate the long-term effects of different asset classes, fees and state allowances for your individual situation, the neutral subsidy calculator is available to you.

Suitable defensive asset classes for the low-risk part of the account

For the gradual rebalancing (glidepath) in the years before retirement, several defensive asset classes are available to you within the Altersvorsorgedepot. The primary aim of this rebalancing is to protect the capital you have accumulated from sudden downturns in the equity market, without giving up liquidity. Because this process takes place completely tax-free in the new Altersvorsorgedepot from 2027, you can transfer gains from equity ETFs into lower-risk assets without any tax deductions. Short-dated euro government bonds, money-market ETFs and low-volatility bond funds are considered especially well suited as this safety component.

Money-market ETFs, which typically track the short-term euro deposit rate (€STR), offer high stability at extremely low volatility. They serve as a modern alternative to a classic instant-access savings account and are excellent for flexibly parking funds before the payout phase begins^[6]. Short-dated government bond ETFs, in turn, invest in debt instruments issued by states with the highest credit ratings (such as the Federal Republic of Germany). A third option is low-volatility bond funds or bond ETFs, which invest more broadly in corporate and government bonds with medium maturities. These carry somewhat higher volatility than money-market instruments, but can generate additional price gains during periods of falling interest rates.

Which ratio of equities to defensive assets is right for you depends on your personal risk appetite and remaining investment horizon. To run through different scenarios for your individual savings path, you can use the subsidy calculator. If you prefer a detailed strategy tailored to your needs, our independent advice service can put you in touch with a competent partner for personal advice. We also provide further technical detail on bond ETFs and portfolio structures in our knowledge section. (Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)

Step-by-step guide: how to implement the glidepath in your account yourself

Anyone who takes their retirement planning into their own hands can steer the gradual risk reduction before retirement themselves. Unlike in a regular securities account, this rebalancing process is tax-free throughout the entire accumulation phase in the Altersvorsorgedepot, because no Abgeltungsteuer is due on realised gains^[3]. This lets you sell equity ETF units tax-neutrally and rebalance into low-volatility interest-bearing products or bond ETFs. On our knowledge section, we show how this tax exemption protects your returns over the long term. Without the tax deduction, more capital stays invested, which considerably strengthens the compound-interest effect all the way to retirement.

The three phases of manual rebalancing

• Set your time horizon: pin down precisely when you plan to retire. Typically start reducing your equity allocation step by step around ten years before payout, to defuse sequence-of-returns risk.
• Calculate the rebalancing amounts: recalculate the capital to be rebalanced every year. A systematic withdrawal and rebalancing plan protects you from market volatility and emotionally driven mistakes during weak phases on the stock market.
• Execute cheaply: carry out the rebalancing through low-cost providers. Compare neobrokers using the provider comparison to keep transaction costs and account fees permanently low.

Please note, for your own calculations: these example allocations are for illustration only and depend on your personal risk appetite. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG. For a detailed, individual simulation, you can use the subsidy calculator on our site to transparently calculate your personal state support, expected final capital and the cost impact of switching.

Preparing payout options: setting the course for the drawdown phase

How you rebalance your Altersvorsorgedepot in the years before retirement depends critically on your planned payout strategy. If you opt for a flexible, instalment-based drawdown plan, you can hold a higher equity allocation for longer. Because in this scenario capital is only withdrawn gradually over decades, a remaining part of the account can stay invested in equity markets and benefit from long-term returns. If, on the other hand, you plan conversion into a classic life annuity right at retirement - possibly combined with the legally permitted one-off withdrawal of up to 30 percent -, you need maximum capital security on that specific date^[7]. In this case, the equity allocation must be reduced considerably earlier and more consistently as part of the glidepath. Otherwise, an unforeseen market downturn shortly before retirement could noticeably erode the assets you have saved, since you would not have time to sit out a downturn.

The Altersvorsorgedepot, introduced as part of the private pension reform, offers a decisive tax advantage for this risk-management process. While in a conventional, unsubsidised securities account every sale of ETF units immediately triggers the Abgeltungsteuer and thus reduces the capital available for reinvestment, rebalancing within the state-subsidised Altersvorsorgedepot remains completely tax-free^[7]. Gains stay in the account and can be transferred into lower-volatility asset classes such as bond ETFs or money-market funds without any tax friction. Only when you eventually withdraw money in the drawdown phase does deferred taxation apply, at your individual tax rate. This privilege makes implementing a gradual risk reduction straightforward and highly efficient. For detailed planning and comparing different options, our knowledge section offers well-founded, source-based guides. (Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.)

When independent advice service pays off for rebalancing

The closer retirement gets, the more sensitively the accumulated Altersvorsorgedepot reacts to short-term price drops. This so-called sequence-of-returns risk (the risk of an unfavourable order of returns right at the start of the drawdown phase) can noticeably erode the capital remaining for retirement^[1]. While the new Altersvorsorgedepot allows fully tax-free rebalancing between higher-risk equity ETFs and lower-volatility asset classes from 2027, precisely calibrating such a glidepath mathematically is demanding. For many soon-to-be retirees, independent advice service pays off here to help secure the transition.

A licensed expert does not look at the Altersvorsorgedepot in isolation, but integrates it into your entire financial life situation. This involves analysing how statutory pension entitlements, occupational pension provision and private contracts best complement each other. This holistic, financial-mathematics-based advice helps you avoid costly mistakes when rebalancing. Always bear in mind: financial model calculations are for illustration and do not constitute investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG. You should discuss the precise tax implications for your individual case with qualified tax or financial experts, whom you can find easily through our portal.

If you would like personal, independent support in implementing your glidepath, our independent advice service service takes you straight to competent partners. If you would rather familiarise yourself with the numbers on your own first, our subsidy calculator offers a source-based first orientation. Also use our knowledge section to keep track of all the regulatory basics and make well-founded decisions.