Skip to content

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

Ramesh retires with a corpus of Rs 1,00,00,000 and withdraws Rs 5,00,000 in the first year, increasing the withdrawal by inflation each year. This approach is best described as which initial withdrawal rate?

It is a 5 percent initial withdrawal rate with inflation-indexed withdrawals. Rs 5 lakh divided by a Rs 1 crore corpus equals 5 percent, and raising the amount each year by inflation keeps the real spending power constant.

  1. A5 percent of the corpus, with inflation-indexed withdrawalsCorrect
  2. B5 percent of the corpus, with fixed nominal withdrawals
  3. C20 percent of the corpus, with inflation-indexed withdrawals
  4. D0.5 percent of the corpus, with fixed nominal withdrawals

Explanation

5,00,000 / 1,00,00,000 = 5 percent. Because withdrawals rise with inflation each year, it is an inflation-indexed withdrawal at a 5 percent initial rate. The fixed nominal option ignores the stated inflation increase.

Did you get it right without looking?

One question tells you little. A timed set on Miscellaneous Aspects of Retirement Planning shows your real accuracy, how long you take and where you lose marks.

Practise Miscellaneous Aspects of Retirement PlanningFree diagnostic mock

More Miscellaneous Aspects of Retirement Planning questions