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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning

Caselet: Arvind, aged 60, has a corpus of Rs 90,00,000 at retirement. He needs Rs 6,00,000 a year in today's money, with inflation of 6 percent and a post-retirement return of 6 percent. Treating real return as zero for simplicity, with expenses paid at the start of each year, for how many years will the corpus last?

The corpus will last 15 years. When the post-retirement return equals inflation, the real return is zero, so the Rs 90 lakh corpus simply divides by the Rs 6 lakh real annual expense, giving 15 years of income.

  1. A15 yearsCorrect
  2. B12 years
  3. C18 years
  4. D10 years

Explanation

With return equal to inflation, the real return is zero, so each year's real expense is Rs 6,00,000 and the corpus lasts 90,00,000 / 6,00,000 = 15 years. 12 years wrongly assumes a Rs 7,50,000 annual need. 18 years wrongly assumes a Rs 5,00,000 annual need.

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