Strategic Asset Allocation for Retirement Planning

John and Sarah Anderson are a married couple in their late 40s, currently contemplating their long-term financial goals. They have three children and plan to finance their college education while simultaneously saving for retirement. John is a senior executive at a technology firm earning $250,000 annually, while Sarah is a freelance graphic designer earning $70,000. Their total investable assets amount to $2 million, composed of 70% in equities, 20% in fixed income, and 10% in cash equivalents.

John and Sarah expect an average annual return of 6% from equities, 3% from fixed income, and 1% from cash equivalents. They aim to retire in 15 years and desire an annual income of $120,000 during retirement, adjusted for inflation at 2% per annum. The couple is concerned about market volatility and the potential impact on their portfolio, particularly under adverse economic conditions.

Given their financial situation and goals, outline a strategic asset allocation plan that begins with their current asset mix and incorporates their risk tolerance, time horizon, and investment objectives. Discuss the rationale for your recommendations and how it aligns with the principles of strategic asset allocation.