NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products
Caselet: Mrs. Kapoor, 35, plans to retire at 60 and expects monthly expenses of Rs 50,000 in today's terms. Assume inflation of 6% per year, with the inflated annual expense at retirement approximated as Rs 6,00,000 x 4.29. She wants a corpus using a 4% withdrawal rate from the first year's inflated expenses. Which corpus is correct?
The required corpus is Rs 6,43,50,000. Inflated annual expenses are Rs 6,00,000 x 4.29 = Rs 25,74,000, and dividing by the 4% withdrawal rate (multiplying by 25) gives the corpus at retirement.
- ARs 6,43,50,000Correct
- BRs 2,57,40,000
- CRs 1,03,00,000
- DRs 25,74,000
Explanation
Inflated annual expense = 6,00,000 x 4.29 = Rs 25,74,000. Corpus at a 4% withdrawal rate = 25,74,000 / 0.04 = Rs 6,43,50,000. Rs 2,57,40,000 wrongly uses a 10% rate, and Rs 25,74,000 is just the annual expense.
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