Ms. Chen, a 45-year-old executive earning $250,000 annually, has approached you to develop an IPS. She has saved $1.5 million and aims to retire in 15 years with an inflation-adjusted annual income of $150,000. She is comfortable with moderate market fluctuations but wants to avoid any single year losing more than 15% of her portfolio value. Which of the following best describes her primary return objective?

Question: Ms. Chen, a 45-year-old executive earning $250,000 annually, has approached you to develop an IPS. She has saved $1.5 million and aims to retire in 15 years with an inflation-adjusted annual income of $150,000. She is comfortable with moderate market fluctuations but wants to avoid any single year losing more than 15% of her portfolio value. Which of the following best describes her primary return objective?

Answer options:

• To achieve a real return exceeding 6% annually. ✅ To generate sufficient capital for a $150,000 real annual income in 15 years.
• To outperform the S&P/TSX Composite Index by 200 basis points annually.
• To minimize investment fees and expenses to maximize net returns.

Correct answer: To generate sufficient capital for a $150,000 real annual income in 15 years.

Explanation: Her primary objective is to accumulate enough wealth to fund her desired retirement income goal, which is an absolute return target. The specific income amount and timeline define the magnitude of the required portfolio growth.