NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Planning Basics
Anita Rao, aged 58, plans to retire at 60 with annual expenses of Rs 10,00,000 at that time (retirement-date rupees). She assumes the corpus earns a post-retirement return equal to the inflation rate, so the real return is zero, for a retirement of 25 years, with expenses drawn at the start of each year. What corpus is needed at retirement?
When the post-retirement return equals inflation, the real return is zero, so the corpus equals the number of years multiplied by the first-year expense. For 25 years at Rs 10,00,000 this is Rs 2,50,00,000, with no discounting needed.
- ARs 2,50,00,000Correct
- BRs 2,40,00,000
- CRs 2,60,00,000
- DRs 1,00,00,000
Explanation
With a zero real return, the present value of the inflation-adjusted withdrawals is simply their real sum: 25 years x Rs 10,00,000 = Rs 2,50,00,000 in retirement-date rupees. Rs 2,40,00,000 counts only 24 years, and Rs 2,60,00,000 counts 26 years.
Did you get it right without looking?
One question tells you little. A timed set on Retirement Planning Basics shows your real accuracy, how long you take and where you lose marks.
More Retirement Planning Basics questions
- Mr. Sharma retires with annual expenses of Rs 6,00,000 in the first year of retirement, rising at 6% a year. His corpus earns 6% a year, wit…
- Caselet: Mr. Rao, aged 45, has a current retirement corpus of Rs 50,00,000 invested at an expected 8% annual return. He plans to retire at 6…
- Mr. Raghav Iyer, aged 40, has current annual expenses of Rs 6,00,000. He plans to retire at 60 and assumes inflation of 5% a year. Using the…
- In retirement planning, the term 'replacement ratio' refers to which of the following?
- Meera, aged 58, plans to retire at 60 and expects to live to 85. Her first-year retirement expense is Rs 6,00,000, rising 5% a year, and the…
- Which of the following is a longevity risk faced by a retiree?