Markets will fall. The question is whether you planned for it.
There are very few guarantees in investing.
But here is one: at some point, your portfolio will go down.
That is not pessimism. That is normal market behaviour.
For someone still working, a market drop may be uncomfortable, but it usually does not affect day-to-day life. If your income is stable and you are not withdrawing from your portfolio, you can often keep investing and let the market do what markets do.
Retirement is different.
When you are relying on your portfolio to pay for groceries, utilities, travel, gifts, taxes, and everything else, a market crash feels very different.
That is where the retirement war chest comes in.
What is a retirement war chest?
A retirement war chest is the part of your plan designed to help you get through difficult markets without being forced to sell long-term investments at the wrong time.
Some people call this a cash wedge.
The idea is simple: you set aside enough safe money to cover a certain amount of spending. That way, if markets fall, you have a source of cash to draw from while giving the rest of the portfolio time to recover.
This is not about maximizing returns.
In many cases, holding cash or short-term GICs will reduce long-term return compared to investing everything.
But retirement planning is not just a spreadsheet problem.
It is also a human problem.
The war chest buys time
The right amount is not based on a random percentage.
It is based on time.
If you spend $100,000 per year from your portfolio, then $200,000 represents roughly two years of spending. $300,000 represents roughly three years.
That is why cash flow matters so much in retirement planning. You cannot build a proper safety reserve if you do not know what your life costs.
A war chest is not “I have some cash.”
It is “I know how many years of spending I have available if markets get ugly.”
Safe money should actually be safe
One of the biggest mistakes investors make is taking too much risk in the “safe” part of the portfolio.
If the purpose of this money is to be available during a market crash, it should not be sitting in risky bonds or investments that may fall at the same time as equities.
For this part of the portfolio, boring can be beautiful.
Cash. High-interest savings. Short-term GICs. High-quality short-term fixed income.
The job of this money is not to impress anyone.
The job is to be there when you need it.
Planning beats panic
The worst time to create a crash plan is during a crash.
By then, emotions are high, headlines are awful, and every decision feels bigger than it is.
The better approach is to decide ahead of time:
“If markets fall, this is what we will do.”
That does not remove all fear. But it gives you a process.
And in retirement, a good process can be the difference between staying invested and making a permanent mistake during a temporary downturn.
