NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Miscellaneous Aspects of Retirement Planning
Mr. Rao, aged 60, has a retirement corpus of Rs 2,00,00,000 and follows a 4% initial withdrawal rule, increasing the withdrawal by inflation annually. If inflation in the first year is 5%, what is the withdrawal in the second year (withdrawal made at the start of each year)?
The second-year withdrawal is Rs 8,40,000. The first-year withdrawal is 4% of Rs 2 crore, which is Rs 8,00,000, and it is then increased by 5% inflation. The percentage is applied only to the initial corpus, not recalculated each year.
- ARs 8,00,000
- BRs 8,40,000Correct
- CRs 8,32,000
- DRs 10,00,000
Explanation
First-year withdrawal = 4% of 2,00,00,000 = Rs 8,00,000. Inflating by 5% gives 8,00,000 x 1.05 = Rs 8,40,000. Rs 8,32,000 wrongly applies 4% to a grown amount, and Rs 8,00,000 ignores inflation.
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