How much equity ETF in the Altersvorsorgedepot?
Published on · Updated on · Managing Director & Partner, Alsterspree Verlag GmbH
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The core decision: why your equity allocation is your most important lever
When structuring your state-subsidised Altersvorsorgedepot independently, you face a pivotal decision: how large should the share of equity ETFs be compared with lower-risk investments? This allocation decision, often called asset allocation, determines the long-term return potential and volatility of your portfolio far more strongly than the choice of individual securities. As a source-based information portal, the knowledge section helps you adjust this lever systematically and free of emotional influence. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
A key mathematical factor is risk compensation over time. The longer your investment horizon, the more robustly the historical recovery capacity of global equity markets acts as a buffer against temporary price slumps. Historical data from the Deutsches Aktieninstitut shows, for example, that a broadly diversified global equity investment held for 15 years has in the past always achieved a positive return and fully offset crises[1]. For self-directed investors, this means a long horizon mathematically justifies a high equity allocation, since short-term fluctuations barely threaten the eventual retirement outcome.
To avoid costly investment mistakes, you must strictly distinguish between volatility and permanent loss. Temporary price declines on the stock market are merely paper losses that represent the necessary premium for long-term growth. A real, permanent loss only arises when you sell in a panic during a phase of market pessimism and thereby lock in temporary devaluations. A stable retirement strategy is therefore based on a deliberate equity allocation that suits your personal risk tolerance and stops you reacting emotionally to falling prices.
- Investment horizon as the foundation: a remaining period of more than 15 years allows maximum focus on high-return equity ETFs.
- Accepting volatility: fluctuations are the price for the long-term outperformance of equities over classic savings products.
- Checking your risk capacity: only choose an allocation high enough that you'd stay calm even during a temporary market slump of 30 percent.
The foundation: correctly assessing risk appetite and investment horizon
The ideal equity allocation in the Altersvorsorgedepot depends primarily on your remaining investment horizon and your personal risk capacity. With a long term of more than 15 years, a high equity-ETF share of up to 100 percent is rational, since historical market phases show that short-term fluctuations reliably even out over that period[2]. The closer your planned retirement gets, the more this risk should be gradually reduced, to protect your accumulated capital from sudden market slumps.
Risk tolerance vs. financial capacity
When determining your equity allocation, you need to distinguish between your emotional risk tolerance and your objective financial capacity. Emotional tolerance describes how well you can sleep with temporary paper losses in your account without selling in a panic. Financial capacity, by contrast, defines how long you could do without the invested money in an emergency. For long-term private pension saving, financial capacity is the decisive factor, since capital in the subsidised account stays earmarked and invested until retirement. Our knowledge section offers deeper analyses of state-subsidised investing. The combination of a long investment period and state subsidy further reduces the real risk of loss.
| Remaining term to retirement | Recommended equity allocation | Safety components | Investment strategy |
|---|---|---|---|
| More than 15 years | 80 to 100 percent | 0 to 20 percent | Maximum wealth building with global equity ETFs |
| 10 to 15 years | 60 to 80 percent | 20 to 40 percent | Moderate return orientation, early-stage risk management |
| 5 to 10 years | 40 to 60 percent | 40 to 60 percent | Balanced portfolio, preparing for gradual rebalancing |
| Less than 5 years | 10 to 30 percent | 70 to 90 percent | Capital preservation takes priority, minimising loss risk |
This tiered scale serves as a proven rule of thumb for self-directed investors. Anyone who starts early with a high equity allocation benefits maximally from the compound-interest effect on both their own contributions and the state allowances. To simulate the concrete effects of different equity allocations on your future retirement assets, our free subsidy calculator is available to you. Keep in mind for every plan: the scenarios shown here are for illustration. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
Historical evidence: why equity risk fades over the long run
Anyone saving long-term for retirement often worries about short-term price swings in the equity markets. Historical evidence shows, however, that this risk drastically diminishes with a long investment horizon[3]. Using the globally focused MSCI World Index as an example, a broadly diversified equity savings plan held for at least 15 years has historically achieved a positive return in every historical period[4]. So for anyone saving monthly over decades, short-term market slumps become almost negligible.
For such long-term periods of 15 years, the average annual return historically lay mostly between 8.7% and 9.7%[4]. Short-term crises - such as the bursting of the dot-com bubble or the global financial crisis of 2008 - were fully offset by subsequent recovery phases in world markets. Time therefore demonstrably beats market timing: anyone who starts early with a high equity allocation makes optimal use of the compound-interest effect and builds up private wealth systematically. In our well-founded guides in the knowledge section we explain in detail how these market cycles work.
| Investment horizon | Historical probability of loss | Average return performance |
|---|---|---|
| 1 year | High (short-term fluctuations dominate) | Very volatile (strong annual swings possible) |
| 5 to 10 years | Moderate (crises can still weigh on returns) | Increasingly stable recovery tendencies |
| From 15 years | Historically near zero (no losses in the MSCI World) | Stabilises around the long-term average |
This historical pattern has a direct bearing on structuring your personal Altersvorsorgedepot: the longer your remaining investment horizon to retirement, the more comfortably you can choose a high or even full equity-ETF allocation. Patience in global equity markets is systematically rewarded, since interim price corrections statistically even out over the decades and the long-term growth trend dominates.
Please note the legal disclaimer: the calculations and returns mentioned are based on historical data and are no guarantee of future performance. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
Classic rules of thumb for equity allocation put to the test
One of the best-known methods for determining the right equity share in an account is the traditional formula, 100 minus age equals equity allocation. According to this, a 30-year-old saver should choose an equity allocation of 70 percent, while a 60-year-old invests only 40 percent in equities, to gradually reduce risk before retirement. This mathematically simple rule, however, comes from a past era of lower life expectancy and historically higher interest rates on government bonds. In modern retirement planning, because of the longer payout phase, it often leads to a far too defensive portfolio, causing investors to forgo valuable return potential.
The more modern variant: 110 minus age
To do justice to rising life expectancy and the changed interest-rate landscape, financial experts today more often recommend the modernised formula, 110 minus age, or even 120 minus age for those with a high risk appetite, as a guide[5]. Under this contemporary variant, a 50-year-old investor arrives at an equity allocation of 60 percent instead of the traditional 50 percent. On our portal Vorsorgedepot-Lotse, we show you in the detailed knowledge section how to analyse your personal risk capacity and adapt these mathematical rules of thumb to your own situation. Anyone who also wants to precisely simulate the state subsidy and its effect on their eventual final capital is best served by our interactive subsidy calculator.
- Individual risk tolerance: can you calmly ride out short-term equity-market swings of twenty percent or more without rashly selling your holdings?
- Additional income sources: if you're covered in retirement by a company pension, fixed pensions or property, you can maintain a permanently higher equity allocation in your account.
- Flexible payout timing: a variable retirement start helps you bridge any market lows at the end of the accumulation phase without time pressure or financial strain.
In summary, these classic rules of thumb serve as a useful initial compass for self-directed investors, but they don't replace individual financial planning. Setting the optimal equity-ETF share always remains a personal trade-off between mathematical return maximisation and your psychological comfort during volatile market phases.
Tiering by remaining term: typical equity allocations at a glance
How large the share of equity ETFs in the Altersvorsorgedepot should be depends primarily on your remaining investment horizon. A long time horizon lets you reliably ride out short-term market fluctuations and benefit from the historically higher returns of equity investments. In our knowledge section we always stress that individual risk capacity forms the foundation of every asset allocation. Anyone with decades still to go before retirement can theoretically choose a maximum equity allocation, since temporary price declines statistically even out. The closer retirement gets, however, the more important capital preservation becomes. A structured tiering helps self-directed investors adjust their portfolio to their life cycle in good time and without emotional pressure.
Guidance on equity allocation by investment horizon
| Remaining term to retirement | Typical equity allocation | Risk character | Strategic focus |
|---|---|---|---|
| More than 20 years | 80 to 100 % | High | Maximum wealth building through compound interest |
| 15 to 20 years | 70 to 90 % | Moderate to high | Strategic growth with initial risk control |
| 10 to 15 years | 50 to 70 % | Balanced | Securing return potential, gradually reducing volatility |
| 5 to 10 years | 30 to 50 % | Conservative | Prioritising capital protection, gentle transition |
| Less than 5 years | 10 to 30 % | Very conservative | Capital preservation for the upcoming payout phase |
This tiering serves as a timeless rule of thumb for methodically reducing volatility ahead of the payout phase. While research indicates that a permanently maximum equity allocation historically carries the lowest probability of a real capital shortfall in old age[6], this approach demands extremely high psychological resilience during severe market downturns. For most private investors, a gradual transition into lower-risk investments such as bond ETFs or money-market products (the so-called lifecycle model) is the safer route to prevent panic selling shortly before retirement. Use our subsidy calculator to simulate how different subsidy amounts and savings rates play out over the long term.
Please note: the figures given are general guideline values and do not constitute investment advice. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
The glidepath: how to gradually reduce risk before retirement
Self-directed investors building their own retirement savings face a particular challenge in the final years before retirement. A sudden market slump shortly before retirement can hit accumulated assets hard, since there's no longer enough time to ride out losses. In financial theory, this risk is called sequence-of-returns risk[7]. To manage this risk systematically, a so-called glidepath (a rebalancing plan) is recommended, under which the equity allocation is gradually reduced as the investment horizon shortens.
Sequence-of-returns risk and the tax advantage in the Altersvorsorgedepot
When implementing a glidepath, the new Altersvorsorgedepot offers a decisive advantage over a conventional brokerage account: the continuous rebalancing and the annual portfolio adjustments happen entirely tax-free within the subsidised wrapper. In an unsubsidised broker account, every sale of profitable ETF holdings would trigger the Abgeltungsteuer (capital-gains withholding tax), which would substantially reduce the compound-interest effect over the decades. In the Altersvorsorgedepot, by contrast, you can adjust your allocation to your remaining time horizon without any tax penalty. With the subsidy calculator on our portal, you can precisely simulate the long-term benefit of this tax-free rebalancing.
Practical guardrails for the final 10 to 15 years
The active phase of risk reduction should typically begin 10 to 15 years before the planned retirement date. A proven rule of thumb calls for reducing the equity allocation by around 3 to 5 percentage points a year from that point, until the desired safety level for the withdrawal phase is reached. Part of the capital usually stays in equity ETFs, so you still benefit from returns in retirement, while the rest flows into lower-risk investments such as government bonds or fixed-term deposits. This secures liquidity for the first years of withdrawals and gives the remaining equity holdings time to recover from any price declines. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
Getting the implementation right in the Altersvorsorgedepot: beginners through to advanced
Once you've determined the right equity allocation for your investment horizon, it's time for the practical implementation in the Altersvorsorgedepot. As a self-directed investor, you have full flexibility to structure your portfolio individually. For getting started, a simple single-ETF solution tracking a global equity index such as the MSCI World or FTSE All-World is usually recommended. These indices spread capital across thousands of companies worldwide, effectively reduce single-stock risk, and are entirely sufficient for long-term wealth building.
- The single-ETF solution for beginners: you invest in a single, globally diversified product. A classic All-World ETF covers both developed and emerging markets, so there's no need to rebalance between regions yourself.
- The core-satellite model for advanced investors: a broad world ETF forms the foundation, for example with an 80 percent weighting. Smaller additions such as small-cap or thematic ETFs let you set targeted return priorities.
Regardless of the model you choose, regular rebalancing is essential to keep your target allocation stable. Since equity markets fluctuate, the weighting shifts over time. A strong equity year can quickly shift an original 70:30 split to 80:20, unintentionally raising your risk profile. Annual rebalancing (selling winners and topping up underweighted holdings) restores the desired balance. Historical data from broadly diversified indices shows that fluctuations even out remarkably well statistically over long periods of 15 years and more[8].
For the practical setup, simply arrange an automatic savings plan with your chosen provider that channels the amounts directly into the desired ETFs. If you're unsure which structure best fits your life situation, our knowledge section offers detailed step-by-step guides and neutral comparisons. Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
Deciding for yourself or getting advice: the best path to your account
Determining the optimal equity allocation for your retirement savings is a deeply individual matter, shaped significantly by your personal life situation and investment horizon. While mathematical rules of thumb offer excellent guidance, the practical implementation confronts you with a fundamental fork in the road. You can either manage your Altersvorsorgedepot entirely on your own, or use professional support to avoid complex tax and regulatory pitfalls.
Two equally valid paths for your retirement strategy
For self-directed investors who want to manage their finances independently through a low-cost neobroker, self-directed portfolio management offers maximum cost efficiency and full control over ETF selection. If, on the other hand, you need to plan for a complex family situation, have irregular income as a self-employed person, or want to restructure existing legacy contracts, independent fee-based advice can be the safer option[9]. A qualified adviser helps you define a tailored risk profile without hidden commissions reducing your return.
- The self-directed path: ideal for digitally savvy investors who use the provider comparison and want to run their account cost-efficiently on their own.
- The advised path: sensible for people who use our independent advice service to get in touch with unaffiliated experts and clarify complex tax situations.
- The data-based foundation: our subsidy calculator works out the exact state subsidy and the long-term cost impact of your savings plan for either path.
Whichever path you choose - a solid, data-based foundation is essential. With the subsidy calculator you can compare different scenarios for your future pension and calculate how state allowances affect your return. Our knowledge section accompanies you on this journey as a reliable and neutral guide, so you can make well-founded decisions for your financial future.
Not investment advice within the meaning of § 1 Abs. 1a Nr. 1a KWG.
Häufig gestellte Fragen
- Should you put 100 percent into an equity ETF in the Altersvorsorgedepot?
- With a very long term of more than 15 years, a high equity allocation of up to 100 percent can make sense, since market fluctuations have historically had enough time to even out. The return triangles from the Deutsches Aktieninstitut show that investors with a broadly diversified global equity savings plan (MSCI World) held for at least 15 years have historically suffered losses in no period at all. A high or full equity allocation is an investment principle here, not a regulatory requirement; past returns are no guarantee of future performance. The closer retirement gets, the riskier a purely equity-based allocation becomes, since a sudden crash shortly before retirement can significantly reduce your capital.
- How can investment risk be reduced before retirement in the Altersvorsorgedepot?
- To reduce risk before retirement, use a so-called glidepath (a rebalancing plan). This involves gradually shifting your capital from volatile equity ETFs into lower-risk investments starting roughly 10 to 15 years before your planned retirement. This locks in the gains you've made. The new Altersvorsorgedepot generally allows such rebalancing tax-free within the account wrapper, so that by the time you retire you hold only a smaller, low-volatility equity share.
- Which rule of thumb helps determine the right equity allocation?
- A classic rule of thumb for the equity allocation is '100 minus age'. Someone who is 40 years old would therefore hold 60 percent in equity ETFs. Since life expectancy is rising and money often stays invested for decades even in retirement, experts today recommend more modern formulas such as '110 minus age' or even '120 minus age'. At an age of 40, the 110 rule would give an equity allocation of 70 percent. Such rules of thumb, however, serve only as rough guidance and need to be adapted to your personal risk tolerance.
- How much return can you expect long-term with a broadly diversified equity ETF?
- Historical data shows that broadly diversified equity investments deliver solid returns over the long term. The return triangles from the Deutsches Aktieninstitut show, depending on the holding period and evaluation year, an average of around 8 to 9 percent annually for the MSCI World over the long run; over very long savings-plan periods, the average annual return in individual cohorts ranged between roughly 8.7 and 9.7 percent. These historical figures are no guarantee for the future, but they do demonstrate the earning power of equity investments for private retirement provision.
- What happens to the state subsidy with a high equity allocation?
- The state subsidy for the new Altersvorsorgedepot remains fully intact regardless of your chosen equity allocation. Whether you invest 100 percent in an equity ETF or choose a more defensive split, you receive the allowances and tax benefits as long as the chosen product meets the statutory criteria of the Altersvorsorgedepot. You can easily calculate your personal subsidy entitlement and the exact cost impact with the tool called the subsidy calculator.
Sources
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