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

Suresh, aged 58, is a salaried employee planning to retire at 60. His adviser says his main need is to ensure income lasts for life and keeps pace with rising prices. Which feature of his post-retirement portfolio best addresses the inflation concern?

Keeping a suitable allocation to growth assets such as equity alongside income assets best addresses inflation. Fixed deposits, level annuities and savings accounts pay returns that do not rise with prices, so purchasing power declines over a long retirement.

  1. AHolding the entire corpus in a fixed-rate bank deposit
  2. BKeeping a suitable allocation to growth assets such as equity alongside income assetsCorrect
  3. CConverting the whole corpus to a level life annuity with no escalation
  4. DKeeping the corpus entirely in a savings account for liquidity

Explanation

Inflation erodes fixed incomes over a retirement that may last decades, so some growth assets are needed to raise income over time. Fixed deposits, a level annuity and savings accounts all give returns or payments that do not grow with prices, so purchasing power falls.

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