GICs: The problem with playing it safe Will corporate bonds give her the boost she needs? | Page 2 | GIC discussions | Discussion forum

Loonie said

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A conservative investor may not need the stock market. It really depends on a full assessment of their particular situation. Unfortunately, in Heather's case, we were not given all the details. Why take risks you don't have to at this stage of life? Not everybody will live to their late 90s to ride out the bumps. The next one might take longer than 4 years.

I'm not convinced that retirement years are the time to wait things out.

Yes, one doesn't need equities if one has enough capital. If Heather had $20 million, then she may not. Even if she lost half the purchasing power over the years from accepting the posted GIC rate at the Big 5 Banks, she would still have $10 million of purchasing power left.

$10 million at 1.0% per year in a savings account would give her $100,000 of purchasing power each year. She could live better than most people who are working and earn less than that.

However, the article says she has $200,000, which may or may not include what she has in the mentioned defined contribution pension plan, and a paid-off house.

The proposed three buckets do give her at least ten years of time to wait out any 2008-like years in the equity markets:

1. Years 1 to 10: Cash (savings account GIC's)
2. Years 10 to 20: 70% fixed income, 30% equities
3. Years 20+: 50% fixed income, 50% equities

If there is a sudden need for money during a 2008-like year, she could move money from the fixed income part of buckets #2 and #3 to the first bucket for the upcoming Years 1 to 10. I find it very hard to imagine a scenario where one would need money from all three buckets, an estimated 20+ years of income, in one year.