Preparing Your Retirement Portfolio for the Next Market Crash

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Hello and welcome to the Retiring Canada Podcast. In today's episode, we're tackling a question that every retiree, and anyone preparing to retire, should consider: how do you prepare your retirement portfolio for the next market crash?

The truth is, market drawdowns aren't a matter of if, but when. Yet, despite all the speculation about potential bubbles, like the current buzz around AI and a handful of mega tech companies, the reality is simple: nobody can predict the future. A market crash is inevitable, but with a solid plan, it doesn't have to derail your retirement.

The AI Hype and Market Uncertainty

Right now, there's a lot of talk about the so- called AI bubble. Many investors are convinced that the stock market and economy are being propped up by over-exuberance in AI technology and a small number of huge tech giants. Some predict that when the bottom falls out, we could see a dramatic crash.

On the other hand, optimists believe AI technology will be transformative, and the market could rise even further as it matures. Both sides are confident but here's the problem: no one actually knows which side is right. Anyone who claims they do probably has a bridge to sell you.

But there is one thing we do know: crashes are a part of investing. Over the long term, taking on short-term volatility, what some people call "crashes", is how investors earn the equity premium, which gives higher long-term returns. The challenge is that we don't know when a crash will occur, how deep it will be, or how long it will last.

The Simple Approach: Consistency Over Complexity

So, what can you do to prepare? Here's the good news: it's actually straightforward. Don't try to time the market, don't jump in and out, and don't overcomplicate your strategy. Instead, focus on consistency.

During your accumulation years:

• Spend less than you earn.

• Stay invested.

• Keep contributing regularly to your investments.

• Let compounding work it's magic over time.

When you're nearing retirement, or already retired, your might want to adjust your approach slightly to give yourself a buffer for when markets inevitability decline. I tall all my clients this:

"Since we are in this relationship for the long haul, there is no doubt we will go through market drawdowns together multiple times. It's not a question of if markets will drop, but when and for how long. My role is to have a plan in place for these inevitable events, so the decisions we make today will withstand uncertainty."

Five Strategies to Prepare Your Retirement Portfolio

Here are five strategies every retiree should consider:

1. Utilize Low-Cost, Diversified Investments

   
   

   Avoid big bets. Low-cost, diversified investments may not prevent losses during a drawdown, but over the long term, reducing fees has a massive impact.

For example, if you have $1 million in a high-cost fund charging 1.25% versus a low-cost fund at 0.25%, assuming both return 7% before fees, the low-cost option could be nearly $1.75 million higher over 30 years. That's compounding in action!

Check out Episode 55 for a deep dive into how high fees can destroy your retirement. And stay tuned, 2026 will bring new legislation requiring full disclosure of all investment fees on your year-end statements.

2. Consider a Small-Cap Value Tilt

Adding exposure to smaller, profitable companies at a lower relative price historically improves long-term portfolio outcomes. For the last decade, much of the market's growth came from the "Magnificent 7" tech companies, but a small-cap value tilt can diversify your returns and strengthen your portfolio over a 20-40 year retirement.

3. Implement a Cash Wedge and Bond Ladder

Having a cash reserve or bond ladder provides liquidity during market uncertainty, helping you maintain your lifestyle without selling equities at a loss. While there is an opportunity cost compared to being fully invested, this approach reduces stress and allows you to live off your investments with confidence.

4. Be Flexible with Spending

Market fluctuations are beyond your control, but your spending isn’t. Consider delaying large purchases or discretionary travel if markets dip, especially in the first few years of retirement. Early withdrawals during a downturn can have long-lasting effects on your retirement sustainability.

5. Make a Comprehensive Plan

No single strategy works in isolation. Integrating your investment plan with tax, income, healthcare, and estate planning creates a cohesive strategy that can withstand market turbulence. This gives you confidence that the decisions you make today support your long-term goal: a sustainable retirement income for life.

Avoid the Noise

As an investor, I see the same ads you do, promises of low-risk, guaranteed returns, or advisors claiming they can predict the market. Most of these appeals target your limbic system, triggering fear or greed to influence decision-making. Even the smartest investors can fall prey to this.

The reality: the equity market, bond market, and alternative assets are out of your control. You can, however, control what you spend and how your structure your portfolio. That control is the key to a confident, secure retirement.

Action Items for Today

• Review your portfolio under different market scenarios: What happened during COVID? During 2022's rate hikes? Tariffs? How was your retirement income impacted?

• Tune out the noise: Build a portfolio your understand and trust so you don't panic during the next market adjustment.

• Enjoy the holidays with peace of mind, whether celebrating with loved ones or remembering those you miss.

  
  

For more resources, links, and insights, visit retiringcanada.ca

Remember when it comes to your retirement, don't take chances.

Make a plan so you can retire with confidence.

All comments are of a general nature and should not be relied upon as individual advice. The views and opinions expressed in this commentary may not necessarily reflect those of Harbourfront Wealth Management. While every attempt is made to ensure accuracy, facts and figures are not guaranteed, the content is not intended to be a substitute for professional investing or tax advice. Please seek advice from your accountant regarding anything raised in the content of the podcast regarding your Individual tax situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment planning.