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

Which of the following is a typical objective of including a contingency or emergency fund in a retirement plan for a retired client?

A contingency fund in retirement covers unexpected expenses such as medical costs, so long-term investments need not be liquidated at a bad time. It complements rather than replaces health insurance, and it has no effect on equity allocation or tax liability.

  1. ATo maximise equity exposure in the portfolio
  2. BTo cover unexpected expenses such as medical costs without disturbing long-term investmentsCorrect
  3. CTo eliminate the need for health insurance
  4. DTo avoid paying any tax on withdrawals

Explanation

An emergency or contingency fund provides liquid money for unforeseen expenses so that long-term investments need not be sold at unfavourable times. It does not raise equity exposure, replace health insurance, or provide tax exemption.

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