GICs and money market funds remain popular as a result. There's also the question of diversification. But the ultimate risk is whether there will be enough income to retire with a desired lifestyle. Fluctuating investment returns are not a risk, they are merely bumps on the road to a smooth retirement. Many financial consultants tout the wisdom of reducing risk by switching into a bond fund as retirement approaches.
Bonds react to the economy in the same fashion as annuity purchase rates.
When interest rates go up, bonds drop in value and annuity purchase prices also drop. The amount of retirement income employees can buy with their now depleted assets is not supposed to change too much, since they can buy the same monthly annuity with less cash. That's fine, but many investors shun annuities in favour of registered retirement income funds. Financial consultants suggest moving to a more conservative strategy, reducing equities and increasing cash and bonds. Conventional wisdom says that equities are too volatile while bonds and cash are much less prone to fluctuations.