You are working as a financial advisor at a major bank. A non$-$working single women $61$ years old $($NY City Resident$)$ is introduced to you from a mutual friend. She is extremely risk$-$averse and has assets of $$5\mathrm{.}5$M in cash. She owns an apartment valued at $$950,000$ and has total living expenses of $$265,000$ annually. She will be eligible for Social Security at $66\mathrm{.}5$ years old and will receive $$3,000$ per month at that time $($social security is inflation adjusted every year$).$ Her actuarial life is $87$ years of age. She has asked you to design a model portfolio to see how you would invest the assets.

In your answer, you must specify the expected rate of return on each of the asset classes you plan to put in her portfolio, and in what proportion, to generate the targeted rate of return. There are no guarantees when you implement an investment plan. What is the potential for a drawdown in the markets and what could it mean for your plan? It is also possible you might want to explain to your potential client that the most risk averse plan might not have the return potential that she needs to support her lifestyle. The chart below shows that this individual might live longer than her expected actuarial life. How do you factor that into your model? The client is visiting your competitors as well to see whose model she prefers. Please organize your work carefully so that the client will clearly understand the choices that you are proposing.

For $60-$year$-$olds, we see some of the benefits of modern medicine kicking in$.$ The overwhelming majority of $60-$year$-$olds will live until at least $70,$ and the majority will get to at least $80.$