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

Mr. Raghavan, aged 60, needs Rs 6,00,000 for first-year expenses at retirement. He uses a withdrawal approach where the first-year withdrawal is 4% of the starting corpus and later withdrawals are raised yearly by inflation. What starting corpus does this approach require?

The required corpus is Rs 1,50,00,000. Dividing the first-year need of Rs 6,00,000 by the 4% initial withdrawal rate gives this figure, and 4% of Rs 1.5 crore equals Rs 6,00,000, with later withdrawals inflation-adjusted.

  1. ARs 1,50,00,000Correct
  2. BRs 2,40,00,000
  3. CRs 1,20,00,000
  4. DRs 24,00,000

Explanation

Corpus = first-year withdrawal / withdrawal rate = 6,00,000 / 0.04 = Rs 1,50,00,000. Check: 4% of 1.5 crore = 6,00,000. Rs 1,20,00,000 would correspond to a 5% rate, so it is wrong.

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