The Johnsons, both 50, want to retire at 60. Their combined RRSP assets are $1 million, TFSA assets are $150,000, and they have $300,000 in non-registered investments. They expect to need $80,000 (after-tax) annually in retirement. They are concerned about potential market downturns impacting their retirement income. Which strategy addresses their market risk concerns most effectively?

Question: The Johnsons, both 50, want to retire at 60. Their combined RRSP assets are $1 million, TFSA assets are $150,000, and they have $300,000 in non-registered investments. They expect to need $80,000 (after-tax) annually in retirement. They are concerned about potential market downturns impacting their retirement income. Which strategy addresses their market risk concerns most effectively?

Answer options:

• Shift a larger portion of their non-registered investments into guaranteed investment certificates (GICs) to secure principal.
• Gradually rebalance their entire portfolio towards a more conservative asset allocation over the next 10 years.
• Purchase segregated funds within their non-registered accounts, opting for a guarantee on maturity or death. ✅ Establish a 'retirement bridge' by holding 3-5 years of anticipated retirement expenses in highly liquid, low-volatility assets.

Correct answer: Establish a 'retirement bridge' by holding 3-5 years of anticipated retirement expenses in highly liquid, low-volatility assets.

Explanation: Establishing a 'retirement bridge' or 'income ladder' by allocating several years of expenses to safe, liquid assets (e.g., GICs, money market) insulates their core retirement income from short-term market fluctuations, allowing growth assets to recover without forcing sales during downturns.