Ann Pircio Pardes, a 62-year-old director of early childhood education at a religious institution in Westchester County, New York, is contemplating retirement within the next five years. However, with a family history of longevity, she fears depleting her savings and seeks an accurate projection of her retirement income. As a single woman, she also expresses concerns about long-term care and its associated costs. To address these worries, financial advisor Margarita Perry from RBC Wealth Management conducted a detailed analysis of Pardes' financial situation, considering various scenarios to ensure her financial security during retirement.
Perry began by evaluating Pardes' assets and liabilities. Her primary resources include $300,000 in a 403(b) retirement account, an $88,000 annuity, approximately $150,000 in cash, and a $350,000 mortgage as her sole debt. Pardes spends around $4,600 monthly from her $6,500 take-home pay, saving most of the remainder for future expenses, including a dream trip to Africa. Her Social Security benefits could reach $3,600 per month if claimed at age 67 or exceed $4,000 if deferred until 70.
Perry explored several possibilities with Pardes. One option involved selling her home and renting instead of maintaining her mortgage. Another considered when she might require a new vehicle, though Pardes plans to continue using her current car for as long as possible. Perry also discussed the potential benefits of part-time work post-retirement, which Pardes welcomed, envisioning herself teaching in some capacity.
Given the uncertainties of investment performance, health, and personal aspirations over three decades, planners utilize software to simulate outcomes under different conditions. For instance, what would happen if Pardes sold her house? Delayed Social Security benefits? Engaged in part-time employment? The software assesses the likelihood of her plan succeeding—defined as not exhausting her funds—across numerous hypothetical investment returns. Perry considers a success rate of at least 75 percent acceptable.
Among the four scenarios Perry examined, one had Pardes retiring at 67, claiming Social Security immediately, working part-time until 70, and selling her home. Without long-term care insurance, this scenario yielded only a 56 percent chance of success should she require such care. The final scenario Perry presented included retiring at 67, working part-time, selling her house, delaying Social Security until 70, and purchasing a long-term care policy. This approach resulted in a 73 percent success rate, sufficiently close to Perry's target to recommend it.
In all scenarios, Perry adjusted Pardes' portfolio to allocate approximately 60 percent to stocks and allocated more funds toward her travel aspirations. "You're young!" Perry emphasized, encouraging Pardes to enjoy life while securing her financial future.