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Archive for the ‘Practice Question’ Category

Important Questions for CFP – Retirement Planning

Posted by Prashant Shah on July 24, 2017

Your client starts investing for his retirement goal starting at age 45 years. On 55, todays, he has accumulated 35 Lakh, which he finds insufficient on maturing age 60 if he withdraws 5 lakh p.a. inflation adjustment from his accumulated corpus for 30 years post retirement if the corpus is invested at 7.5% p.a. with inflation expectation of 5.5% p.a. If prior to retirement the growth rate of 9.5% is considered for investing already accumulation fund and fresh annual investment of 3.5 lakh. You estimate the period of delayed retirement beyond.

  1. 4 years 4 month
  2. 3 years
  3. 6 years 6 month
  4. 4 years


A buys second house at 60 lakh. Available loan is 40 lakh for 15 year at 9.5% rate. He liquidates his portfolio towards down payment stamp duty and furnishings. He has 5 lakh cash in hand at present. He is expected to save annually save 2 lakh. He would rent out new house at a rent of 25000 p.m. He will invest remaining cash in hand along with quarterly saving and rent received net of 20% maintenance charge on a quarterly basis beginning a quarter from now. Considering 8% p.a. growth in investment and real estate prices. What would be his net worth five years from now?

  1. 90 L
  2. 82 L
  3. 93 L
  4. 107 L


A professional just retired has accumulated Rs. 52 lakh. He invests this corpus in an investment instrument giving return of 8% p.a. His current annual household expenses are Rs. 6.6 lakh, escalating at inflation of 6% p.a. He would rent out his other fixed property at an expected annual rent of Rs. 2.40 lakh, the rentals increasing at 6% p.a. The balance expenses are met by withdrawing from the invested corpus. The commercial property, currently valued at Rs. 60 lakh, is expected to appreciate at 8% p.a. He expects to sell the property after 15 years to create a fresh corpus for his living expenses. How long the total funds available are expected to last after 15 years?

  1. 14 years 11 month
  2. 14 years 4 month
  3. 12 years 7 month
  4. 13 years 2 month

Posted in CFP, Practice Question, Retirement Planning | 31 Comments »

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 »