As retirement draws an end to one’s earnings period, a smart allocation of assets is needed to enjoy a regular stream of income. Earlier, a rule of thumb for the retirement corpus was that the stock part of one’s portfolio should equal 100 minus the retiree’s age. For example, if an investor retires at 60, 40% of his total savings would go to stocks and the rest to bonds.

But what should one do in a rocky environment like the present one? The traditional 60% stocks / 40% bonds portfolio has suffered in recent years because stocks and bonds have both suffered together occasionally rather than complementing each other.

Inside the Flop Story of 60/40 Rule

Higher inflation has been one of the main reasons the traditional 60/40 portfolio has struggled in recent years. When inflation rises, interest rates tend to move higher, which hurts bond prices. At the same time, higher rates can weigh on stocks, especially growth stocks that rely on future earnings.

To add to this, investors have recently raised concerns about the fiscal health of the United States, putting pressure on U.S. Treasury bonds. As a result, U.S. bonds have often failed to provide their usual cushion during periods of market uncertainty, weakening the effectiveness of the classic 60/40 strategy.

If this was not enough, Vanguard Total Bond Market Index Fund ETF Shares (BND Quick QuoteBND - Free Report) , which yields 4.13% annually and charges 3 bps, gives a slightly higher current income than U.S. inflation (the annual inflation rate was 3.4% in August). So, the scope for enjoying higher current income is also becoming lesser in total market bond ETFs like BND as inflation rises.

Per Eric Balchunas from Bloomberg Intelligence, fixed-income ETFs now make up only 16% of total ETF assets, down from 23% in 2020. Further, they only make up 10% of new launches. So, the lure for bond ETFs is diminishing.

Current Economic & Market Scenario

Rates are at higher levels as inflation is hot due to the Iran war. The Fed and the ECB hiked rates in September. Global economic slowdown risks are building up, and markets are seeing a surge in energy prices due to the war since the start of 2026.

Even if there is a ceasefire, chances of energy prices reaching pre-war levels are unlikely due to the damage to energy infrastructure in the Middle East. Still, the AI boom has provided support to the global stock market. 

The S&P 500 is up about 12.3% this year (as of Sept. 24, 2026). Against this backdrop, below we highlight a few ETF strategies that could be considered in a retirement portfolio with a medium-term focus.

U.S. stocks – 20% Weight

U.S. stocks have been in great shape lately, due to the chip and AI boom. Vanguard Total Stock Market Index Fund ETF (VTI Quick QuoteVTI - Free Report) can be played with a 10% exposure in order to have exposure to the entire stock market spectrum, while the tech-heavy Nasdaq-100-based fund Invesco QQQ Trust, Series 1 (QQQ Quick QuoteQQQ - Free Report) also demands some exposure.

International Markets – 20% Weight

International markets can be a nice addition to a portfolio. Many international stocks are also trading at lower prices than their U.S. counterparts, which could leave more room for future gains. Plus, growing middle-class populations and rising consumer spending in emerging economies are positives.

Meanwhile, some Asian ETFs like iShares MSCI South Korea ETF (EWY Quick QuoteEWY - Free Report) and iShares MSCI Taiwan ETF (EWT Quick QuoteEWT - Free Report) are good AI plays. Investors can also play ETFs like iShares International Select Dividend ETF (IDV Quick QuoteIDV - Free Report) (yields 5.64% annually).

Dividend – 20% Focus

Be it a bull or a bear market, investors mostly love dividend-paying stocks. After all, who doesn’t like a steady stream of current income along with capital appreciation?

Dividend-paying companies are usually good for value investing and are in demand when volatility flares up. Investors have two options in this field – one with steady dividend growth and the other with high yield.

Companies that raise dividends regularly appear steadier than those that offer higher yields. But high-yielding ones also make up for the capital losses to a large extent, if there are any.

So, investors can park 10% of their money into dividend aristocrat ETFs like Vanguard Dividend Appreciation ETF (VIG Quick QuoteVIG - Free Report) and ProShares S&P 500 Dividend Aristocrats (NOBL Quick QuoteNOBL - Free Report) and 10% in high-yield ETFs like First Trust Morningstar Dividend Leaders ETF (FDL Quick QuoteFDL - Free Report) (yields 3.67% annually) and Invesco High Yield Equity Dividend Achievers ETF (PEY Quick QuotePEY - Free Report) (yields 4.51% annually).

Covered Call ETFs – 10% Weight

Covered call ETFs hold stocks and sell call options on those holdings to generate premium income. Selling call options means giving someone else the right to buy a stock from you at a fixed price before a certain date, in exchange for an upfront premium or income.

These ETFs can provide higher income and some downside cushioning, but they generally limit upside potential if the underlying stocks rise sharply. NEOS Nasdaq 100 High Income ETF QQQI and NEOS S&P 500 High Income ETF SPYI are two such ETFs, yielding about 14.91% and 12.85% each. SPYI is up 1.6% this year, while QQQI has added 3.4%.

Autocallable ETFs – 5% Weight

Autocallable ETFs are ETFs that use structured strategies designed to automatically end or “call” the investment early if an underlying index or asset reaches a specified level on a scheduled observation date. They typically offer enhanced income or a defined return, but may limit upside and expose investors to losses if the underlying asset falls significantly.

Autocallable ETFs are the fastest-growing form of Boomer Candy thanks to 14% yields, per Eric Balchunas from Bloomberg Intelligence. FT Vest Laddered Autocallable Barrier & Income ETF ACYN, with about $2.13 billion in assets, can be a good pick in this regard, followed by Calamos Autocallable Income ETF CAIE, with about $1.37 billion in assets. ACYN and CAIE yield 3.84% and 14.34% annually. ACYN is up 3.5% and CAIE is up 0.4% this year.

Bitcoin – 5% Focus

Bitcoin prices slumped earlier this year amid geopolitical tensions and profit-taking. However, the cryptocurrency regained momentum from mid-August. With the Fed raising rates by 25 basis points in September and signaling the possibility of another hike this year, the monetary policy outlook appears clearer for risk-on investors.

Bitcoin’s further journey depends on the CLARITY Act, which aims to create clearer U.S. rules for cryptocurrencies.If the CLARITY Act fails to advance, tokenization activity – such as putting real-world assets on blockchain networks – could increasingly shift outside the United States or remain limited to private markets, according to CKC Fund founder David Doss, as mentioned on Cryptonews.com.

Commodities – 10% Weight

In a rising rate environment, commodities come across as excellent bets. This year is no different as commodities, both liquid and hard, have been staging an uptrend. Invesco DB Commodity Index Tracking Fund (DBC Quick QuoteDBC - Free Report) , Invesco DB Agriculture Fund DBA and United States Copper Index Fund CPER can be timely picks.

Gold – 5% Weight

Gold prices have been on a roller coaster ride this year, with SPDR Gold Trust (GLD Quick QuoteGLD - Free Report) off 1.7%. Higher safe-haven demand long with a Fed pause boosted the bullion price in the initial phase of the year.

However, as the scenario for Fed rate hikes has strengthened and bond yields continued to rise, gold ETF has started giving up gains. GLD is off 8.5% over the past month. But still, some exposure to gold is warranted in a balanced portfolio.

Artificial Intelligence – 5% Focus

While above-mentioned plays have been broad-based, the current tone of investing is artificial intelligence (AI). Global X Artificial Intelligence & Technology ETF AIQ, Invesco AI and Next Gen Software ETF IGPT and CoinShares Bitcoin Mining ETF WGMI and are some ETFs that are red-hot now and are likely to be in focus in the medium term.