The XEQT Glide Path: How to Transition from 100% Equities Before Retirement

My dad retired in 2007 with almost his entire portfolio in Canadian equities. He had done well over the previous 20 years – his portfolio had grown steadily, he was confident in the market, and he figured he would just keep riding it.

Then 2008 happened. His portfolio dropped about 40% in less than a year. At 63 years old, with no paycheque coming in and a retirement lifestyle he had planned around his peak portfolio value, it was devastating. He did not panic sell – I give him credit for that – but he spent the next four years living on a tighter budget than necessary while waiting for his portfolio to recover.

The lesson hit me hard: 100% equities is the right strategy for building wealth, but it can be the wrong strategy for spending it. If you are 25 and holding XEQT, you are doing everything right. But if you are planning to retire in five years and still holding 100% XEQT, you are taking a risk that could reshape your entire retirement.

That is where the “glide path” comes in. Let me explain what it is, why it matters, and exactly how to build one.

1. Why 100% XEQT Is Perfect for Accumulation

First, let me be clear: I am a massive fan of XEQT during your working years. When you are 20, 30, or even 40 years from retirement, holding 100% equities makes sense because:

• You have time to recover from crashes. A 40% drawdown is a buying opportunity when you have 20 years ahead of you.
• Equities have the highest expected long-term returns. Over any 20+ year period, a globally diversified equity portfolio has historically delivered 7-10% annualized returns.
• You are adding money regularly. Dollar-cost averaging through downturns means you buy cheap shares that supercharge future growth.
• You do not need the money. You are not withdrawing, so paper losses are literally just numbers on a screen.

XEQT is the perfect vehicle for this phase. One ETF, 12,000+ global stocks, 0.20% MER, automatic rebalancing. Set up your biweekly contributions and do not think about it.

But this changes as retirement approaches.

2. What Is a Glide Path?

A glide path is a gradual, planned shift in your portfolio’s asset allocation from aggressive (mostly stocks) to conservative (a mix of stocks and bonds) as you approach and enter retirement.

Think of it like an airplane landing. You do not fly at 35,000 feet and then dive straight to the runway. You gradually descend over many miles, adjusting your altitude smoothly until you touch down safely.

Your investment glide path works the same way:

• Cruising altitude (20+ years to retirement): 100% XEQT – maximum growth, maximum turbulence tolerance
• Initial descent (10-15 years out): Start introducing bonds, maybe 80/20 or 90/10
• Approach (5-10 years out): Shift to 60-70% equities, 30-40% bonds
• Landing (0-5 years out): Move toward 50/50 or 40/60 depending on your income needs
• Taxiing (in retirement): Maintain a balanced portfolio that provides growth and stability

The key insight is that you are not trying to maximize returns anymore. You are trying to maximize the probability of a successful retirement. Those are different objectives that require different portfolios.

3. Sequence of Returns Risk: The Invisible Retirement Killer

The reason a glide path matters comes down to something called “sequence of returns risk.” This is one of the most important – and most underappreciated – concepts in retirement planning.

Here is how it works. Imagine two investors, both retiring with $1,000,000 and withdrawing $40,000 per year:

Investor A: Gets good returns early

Investor B: Gets bad returns early

Both investors experienced the same four returns, just in different order. The average return is identical. But Investor A ends up with $751,925 while Investor B has only $691,630 – a difference of $60,000.

Over a 30-year retirement, this effect compounds dramatically. Bad returns early in retirement – when your portfolio is at its largest and you are withdrawing from it – can permanently damage your financial future. Good returns early give you a cushion that sustains you for decades.

This is why sequence risk matters, and this is why 100% XEQT at retirement is dangerous. You cannot control when the next bear market hits. But you can reduce your portfolio’s vulnerability to it by holding bonds that cushion the blow during those critical early retirement years.

4. The XEQT Glide Path: A Practical Framework

Here is a simple, actionable glide path for Canadian investors using the iShares all-in-one ETF family:

A few notes on this framework:

• These are guidelines, not rules. Your specific situation – pension income, spending needs, risk tolerance – should adjust these numbers.
• XGRO and XBAL are convenient shortcuts. Instead of holding XEQT + ZAG separately, you can use XGRO (80/20) or XBAL (60/40) for automatic rebalancing within the fund.
• You do not need to rebalance exactly. If you are supposed to be at 80/20 but you are at 82/18, that is fine. Rebalance once a year, or when your allocation drifts more than 5% from target.

5. The iShares All-in-One Family: Your Glide Path Toolkit

One of the great things about starting with XEQT is that it belongs to a family of all-in-one ETFs with different risk levels. You can glide from one to another as your timeline shortens:

The simplest possible glide path? Start with XEQT, switch to XGRO at 10-15 years out, switch to XBAL at 5-10 years out, and hold XBAL through retirement. Three trades over 20 years. That is it.

6. How to Execute the Transition on Wealthsimple

The mechanics of shifting from XEQT to a more balanced allocation are straightforward:

Option A: Switch to a different all-in-one ETF

1. Sell your XEQT holdings
2. Buy XGRO or XBAL with the proceeds
3. Update your automatic investment to purchase the new ETF
4. Done – the new ETF handles rebalancing internally

Option B: Add a bond ETF alongside XEQT

1. Keep your existing XEQT
2. Start directing new contributions to a bond ETF like ZAG
3. Gradually shift the ratio by adjusting how much goes to each
4. Rebalance once per year by selling the overweight position and buying the underweight one

Option A is simpler. You hold a single ETF that does everything for you. The downside is you trigger a taxable event if you are in a non-registered account.

Option B gives you more control. You can choose your exact equity/bond split and adjust it gradually. But you need to manage two holdings and rebalance manually.

For most people, I recommend Option A. Selling XEQT and buying XGRO or XBAL is one trade that simplifies your life for years to come.

7. Tax Implications of Switching

This is where account type matters a lot:

TFSA and RRSP: No tax worries

In a TFSA or RRSP, you can sell XEQT and buy XGRO or XBAL without any tax consequences. The switch is purely a portfolio allocation decision. Do it whenever your glide path says it is time.

Non-registered accounts: Plan ahead

In a non-registered account, selling XEQT triggers capital gains tax on any profits. If you bought XEQT at $25 and it is now at $35, you owe tax on that $10 per share gain.

Strategies to minimize the tax hit:

• Gradual transition: Sell a portion of XEQT each year to spread the capital gains across multiple tax years
• Use new contributions: Direct all new money to the bond ETF rather than selling XEQT
• Time it with a down year: If XEQT drops, your capital gains will be smaller – it is a silver lining
• Harvest losses elsewhere: If you have losing positions in other investments, sell them to offset the XEQT gains

8. The “I’ll Just Hold XEQT Forever” Myth

I hear this one a lot: “I have a high risk tolerance. I’ll just keep 100% XEQT through retirement.”

I respect the confidence, but I think most people overestimate their risk tolerance – especially when they have never experienced a bear market while withdrawing from their portfolio.

Here is the psychological difference:

During accumulation (working years):

• Portfolio drops 30%: “Great, stocks are on sale. I’ll buy more.”
• You have a paycheque to cover expenses
• You have decades to recover
• Paper losses feel abstract

During decumulation (retirement):

• Portfolio drops 30%: “I just lost $300,000 and I need to sell shares to pay my bills.”
• You have no paycheque to fall back on
• Every share you sell at a loss is gone forever
• Losses feel very, very real

The research backs this up. Studies consistently show that retirees who experience early market losses are far more likely to panic sell, lock in losses, and run out of money. Having bonds in your portfolio – even just 20-30% – dramatically reduces the emotional pressure to sell at the worst time.

The glide path is not about maximizing returns. It is about maximizing your ability to stick with your plan when it matters most.

9. What About Pensions, CPP, and OAS?

Your glide path should account for other sources of retirement income. If you have a defined benefit pension, CPP, and OAS covering most of your basic expenses, you can afford to be more aggressive with your portfolio because you are less dependent on investment withdrawals.

More pension income = more aggressive portfolio:

• Strong pension + CPP + OAS covering 80%+ of expenses: You could hold 70-80% equities in retirement
• Moderate pension covering 50-60% of expenses: A 50-60% equity allocation is reasonable
• No pension, relying mostly on portfolio: Consider 40-50% equities to protect your withdrawal stream

The key question is: “If my portfolio dropped 40% tomorrow, would I still be able to pay my bills?” If the answer is yes because of pension income, you can hold more XEQT. If the answer is no, you need more bonds.

10. A Simple Decision Framework

Not sure where you stand? Use this quick framework:

Step 1: How many years until retirement?

• 15+ years → 100% XEQT, do not change a thing
• 10-15 years → Start thinking about your glide path, begin shifting to 80-90% equities
• 5-10 years → Actively transition to 60-70% equities
• Under 5 years → You should be at 50-60% equities by now

Step 2: Do you have pension income?

• Yes, strong pension → Add 10-15% to your equity allocation at each stage
• Some pension → Use the standard framework above
• No pension → Consider being 5-10% more conservative at each stage

Step 3: What is your emotional risk tolerance?

• “I would not lose sleep over a 40% drop” → Add 5-10% equities
• “A 40% drop would stress me but I would hold” → Standard framework
• “A 30% drop would make me want to sell” → Be 10% more conservative

Step 4: Pick the simplest implementation

• For most people: switch from XEQT to XGRO to XBAL over time
• For those wanting custom control: hold XEQT + ZAG in your chosen ratio

Final Thoughts

The XEQT glide path is not complicated. It is not something you need to obsess over. It is simply an acknowledgment that your investment needs change as your life changes, and that a 25-year-old and a 60-year-old should not have the same portfolio.

Here is the whole strategy in four sentences:

1. Buy XEQT aggressively during your working years. Automate your contributions and do not think about it.
2. Start your glide path 10-15 years before retirement. Gradually introduce bonds through XGRO, XBAL, or a bond ETF like ZAG.
3. Reach your target allocation by retirement. For most people, that is somewhere between 40-60% equities.
4. Hold your balanced portfolio through retirement. Rebalance once a year and enjoy the life you built.

My dad did not have a glide path. I am making sure I do. And if you are reading this while you still have time to build one, you are already ahead of the game.

Start with XEQT. Build your wealth. And when the time comes, land the plane smoothly.