The classic 60/40 portfolio isn’t a magic formula — it’s a design choice that depends on the rate environment. When bond yields are near 0%, the “40” doesn’t do much. In 2025, the bond side offers a real yield again, which changes expected outcomes and the trade-offs you’re making.
Key answer: 60/40 becomes more viable when bonds can contribute meaningful yield and act as a funding buffer during equity drawdowns.
Data & charts: rates backdrop (as of 2025-12-18)
| Series | Instrument | Yield | Date | Source |
|---|---|---|---|---|
| DTB4WK | 4-week T-bill | 3.56% | 2025-12-18 | fred.stlouisfed.org |
| DGS10 | U.S. 10-year Treasury | 4.16% | 2025-12-18 | fred.stlouisfed.org |
Two simple anchors for a 60/40 reassessment: cash-like short rate vs 10-year.
4-week T-bill (DTB4WK)
3.56%
10-year Treasury (DGS10)
4.16%
What changes for 60/40 in 2025
The core changes are practical:
- The bond sleeve can contribute real income (not just “ballast”).
- Cash and short duration instruments become competitive with low-yield equity income products.
- The opportunity cost of holding cash is lower, which can improve behavior in drawdowns.
The risk you still have to respect
Bonds are not risk-free. The main risk is duration: if yields rise, longer bonds can drop in price. A “60/40” built from long-duration bonds behaves differently than one built from short/intermediate duration.
How to model a modern 60/40 plan
- Treat the bond side as a buffer and funding source, not just a volatility reducer.
- Stress-test drawdowns and spending needs, not just average returns.
- Compare a 60/40 path vs dividend income in the same framework, after tax.
Next steps
- Run a withdrawal simulation in the FIRE calculator with two allocations: 80/20 vs 60/40.
- If you prefer dividends, compare the cash flow path in the portfolio calculator.
- Use Strategy Comparator to test “buffer first” vs “fully invested” contributions.
Summary
- 60/40 looks different when bonds yield again.
- As of 2025-12-18, DTB4WK is 3.56% and DGS10 is 4.16 — useful anchors for planning.
- Bond duration matters: short-term bills are not the same as long-term bonds.
- Modern 60/40 is about funding resilience, not perfect diversification.
- Modeling drawdowns and cash flow is more important than picking a single “best” ratio.