This week’s pause in the Bank of Canada's rate hike campaign puts long-term retirement investors in a sweet spot; nestled between growth and security.
The central bank is holding its trend-setting interest rate at 4.5 per cent following an unprecedented inflation-fighting effort that took it from 0.25 per cent a year ago.
And it seems to be working - at least for now. After hitting a four-decade high of 8.1 per cent in June, inflation is projected to come in close to the annualized target rate of two per cent.  
Raising interest rates so much, so fast, is taking its toll on borrowers. The big banks have raised their prime lending rates to a two-decade high of 6.7 per cent. Mortgage rates and unsecured debt such as student and consumer loans are rising in tandem. 
For savers, it’s a Bizarro world, where bad is good.   
Higher interest rates on debt translate into higher yields on fixed-income investments. At last check, the payout on a one-year guaranteed investment certificate (GIC) topped five per cent.
Government bonds yields are also up, along with higher-yielding investment-grade corporate bonds as companies compete for lenders in the bond market. 
Savers now have options to diversify their fixed-income portfolios to squeeze out the best returns over time by staggering maturities. The strategy, known commonly as laddering, presents frequent opportunities to jump into the best yields on the market as they fluctuate or rise. 
Even money market funds, often held as a short-term alternative for cash, are posting larger returns. 
If the Bank of Canada is successful in hitting its inflation target of two per cent, investors could be reaping safe, real returns above three per cent compounding annually.
A three or four per cent annual return might not get many investors where they need to be in retirement, but growth is not the primary objective of fixed income. 
The primary objective of fixed income is safety. In other words, protecting your savings over time ensures you have enough reliable cash in retirement.
The equity portion of a retirement portfolio is intended to drive growth. Rock-bottom interest rates and yields over the past 30 years have pushed investors to seek returns in volatile stock markets. 
Fortunately, equity returns have been brisk but investors now have the option of ratcheting down risk without sacrificing returns by shifting assets from equities to fixed income. If equity markets tank in any given year, fixed income provides a floor.
As a general rule, the fixed income portion of a retirement portfolio is expected to grow as the investor gets older and the time to draw cash nears.
The precise fixed income allocation in a portfolio depends on the age and risk tolerance of the individual investor. A qualified advisor can be a big help.        
The timing has rarely been better to swap the risk of equities for the safety of fixed income.
It’s hard to know how equity markets will react to higher interest rates going forward. Many market experts attribute the stellar performance of stocks over the past three decades to low borrowing costs, and warn higher rates will cool stock markets - or worse. 
Others point to corporate earnings as the primary driver of stock markets, and earnings come from a robust economy.
This week’s Bank of Canada announcement also warned of the possibility of a recession in 2023 as a result of higher rates.
Big institutional investors generally push for lower interest rates because it gives them access to cheap money to make short-term gains from overheated stock markets, fueled by cheap money.
For them, the consequences of risk are short-term setbacks and smaller bonuses. 
The consequences of risk for retail investors entering retirement, on the other hand, can be devastating.