Mr. and Ms. Dubois, both 55, plan to retire in 10 years. They have two children, aged 20 and 22, both attending university. Their current portfolio is $2 million, and they anticipate needing to fund approximately $150,000 in tuition and living expenses over the next 4-5 years for their children. Which of the following is the most significant constraint for their investment portfolio?

Question: Mr. and Ms. Dubois, both 55, plan to retire in 10 years. They have two children, aged 20 and 22, both attending university. Their current portfolio is $2 million, and they anticipate needing to fund approximately $150,000 in tuition and living expenses over the next 4-5 years for their children. Which of the following is the most significant constraint for their investment portfolio?

Answer options:

• Their long-term time horizon until retirement.
• Their regulatory requirement to use registered accounts. ✅ Their specific and substantial short-to-medium term liquidity needs for education expenses.
• Their unique circumstances related to their health and insurance.

Correct answer: Their specific and substantial short-to-medium term liquidity needs for education expenses.

Explanation: The need to fund $150,000 in university expenses over the next 4-5 years represents a significant, defined liquidity drain on the portfolio. This constraint influences the asset allocation to ensure these funds are available when needed without market timing risk.