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Archive for October, 2016

Important Questions for Retirement Planning – 3, CFP

Posted by Prashant Shah on October 26, 2016


A client has 600000 as salary per year and he starts planning for retirement. He saves 10% of his annual salary in a fund, which would yield 8.5% p.a. He would set aside 2% of his salary every year to take strategic advantage and expects a return of 12% pa and the money from such fund is redeemed and invested in the retirement portfolio every 5 years. What is he expected to retire with 15 years from today.



A client invests 1 lakh pa in equity & debt portfolios in 60:40 from his age 36 years. He plans to retire at 60 years. He rebalances the portfolio every 8 years by 10 points in favour of debt to buy an annuity product yielding 6.5% pa. You estimate the inflation-adjusted annuity in the beginning of each year with equity returns at 10% and Debt at 7.5%. Inflation post retirement is 4.5%?



A public sector employee expects to retire after 5 years. He today has a dedicated corpus of 60 Lakh at 9.25% p.a. to fund his 30 years post retirement living expenses. He expects to receive lump sum retirement benefits of Rs. 20 Lakh and a lifelong fixed monthly pension are Rs. 20000 for employee. His current monthly expenses are Rs. 42000. If he can contribute towards retirement fund Rs. 20000 per month till retirement and expect inflation rate to be 6% p.a. from now onwards. You assume the variability annuity rate of 1.5% over and above inflation for 30 years period post retirement to assess additional corpus required. The same is



A retired couple with a fixed pension of Rs. 30000 per month retrenched their expenses which are Rs. 35000 per month today. They stay in their own house. You advise to reverse mortgage their house which can get them a lump sum amount of Rs. 35 Lakh for 15 years @ 8.5% p.a. interest. The annual interest is calculated after every 12 months on the pre standing balance and added to the outstanding loan amount. You invest the available amount after withholding the excess normal expenses for the first year and conceding 5.5% inflation thereafter at the beginning of every year. If the investment yield is 10% pa. By what amount outstanding loan exceeds investments after 5 years.



A 28 year old starts to save for his retirement at 60. You advise him to take maximum advantage of equity in initial stage. The strategy is to invest Rs. 5000 per month in equity scheme. After 5 years, start another monthly investment of Rs. 5000 in a debt scheme while continuing with equity scheme. At his age of 40, switch 50% of accumulated equity investments to debt scheme while increasing debt investment by Rs. 10000. At the age of 60, the entire investment is redeemed to buy an inflation adjusted   annuity expected to yield 6.5% p.a. If his current expenses are Rs. 22000 per month, roughly how many years his corpus will last? Equity – 9.5%, Inflation – 5.5% and Debt – 7.5%


Posted in CFP, Practice Question | 26 Comments »

Discussing Financial Planning with Income Tax Assistants

Posted by Prashant Shah on October 17, 2016

This Friday I got a new opportunity to discuss financial planning with Income Tax Assistants. Usually I go to Direct Taxes Regional Training Institute for income tax officers but this time it was a new place and new audience.

It is always a fun to  understand how people perceive financial planning to be. Audience was very enthusiastic to understand how investment should be made and chosen. The class was from 11 to 1 but it actually ended at 1.15 and still feel that it was very quick and many queries were unanswered.

As they were having almost zero investment in equity and they are under NPS, discussing the life goals and quantifying it was were interesting.

It is a great initiate of Income tax department and thanks to  all the respected IT Officers for giving this opportunity. Sharing some pics with you.img_2685


Posted in CFP | Leave a Comment »