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

Meera, aged 55, has an annual post-retirement expense need of ₹12,00,000 in the first year of retirement, rising with inflation. She plans to withdraw from a corpus that earns a return, and assumes the corpus must fund expenses using a simple 'corpus multiple' approach of 25 times the first-year expense (equivalent to a 4% initial withdrawal rate). The corpus required is:

The required corpus is ₹3,00,00,000. A 4% initial withdrawal rate equals 25 times the first-year expense, and 25 multiplied by ₹12,00,000 gives ₹3 crore. Other multiples correspond to different withdrawal rates, not 4%.

  1. A₹2,40,00,000
  2. B₹3,00,00,000Correct
  3. C₹4,80,00,000
  4. D₹1,20,00,000

Explanation

Corpus = 25 x 12,00,000 = ₹3,00,00,000. A 4% initial withdrawal rate means expense / 0.04 = 12,00,000 / 0.04 = ₹3 crore. Using 20 times gives 2.4 crore, 40 times gives 4.8 crore, and 10 times gives 1.2 crore, all inconsistent with 4%.

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