NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Planning Basics
Ms. Kapoor, aged 58, will retire at 60 with an inflation-adjusted first-year expense of Rs 10,00,000. She wants a corpus using the simple 'withdrawal rate' method with a sustainable initial withdrawal rate of 4% of the corpus. What corpus is required at retirement?
The required corpus equals first-year expense divided by the withdrawal rate: Rs 10,00,000 divided by 4% gives Rs 2,50,00,000. Multiplying by the rate instead of dividing would give a tiny and incorrect figure.
- ARs 2,50,00,000Correct
- BRs 4,00,000
- CRs 40,00,000
- DRs 25,00,000
Explanation
Corpus = annual expense / withdrawal rate = 10,00,000 / 0.04 = Rs 2,50,00,000. Rs 25,00,000 divides by 40% instead of 4%. Rs 40,00,000 multiplies by 4. Rs 4,00,000 multiplies expense by 4%, which is the wrong direction.
Did you get it right without looking?
One question tells you little. A timed set on Retirement Planning Basics shows your real accuracy, how long you take and where you lose marks.
More Retirement Planning Basics questions
- Anita, 35, wants a retirement corpus of Rs 2,00,00,000 at age 60. She has no existing savings and expects an annual return of 10% during acc…
- Mr. Iyer, aged 40, has current annual expenses of Rs 6,00,000. He expects to retire at 60. Assume inflation of 5% a year. Rounded to the nea…
- Mrs. Anita Rao, aged 58, is risk-averse and plans to retire in two years. Her portfolio is currently 85% in equity. Which recommendation by …
- Mr. Rao needs a corpus at retirement that can fund Rs 12,00,000 a year of expenses forever, with the corpus earning a constant 6% a year and…
- Mr. Sharma retires with annual expenses of Rs 6,00,000 in the first year of retirement, rising at 6% a year. His corpus earns 6% a year, wit…
- Mr. Sanjay Mehta retires with a corpus invested to give a real (inflation-adjusted) return. His expected post-retirement return is 9% a year…