Retirement Planning Numericals Lecture 1

1. A person-aged 42yrs has a monthly expense of Rs. 60,000/-, which he thinks would grow at 7% p.a.
He would also like to increase his lifestyle every year by 3%. He wishes to retire & stay with his wife
at the age of 60 yrs as his father died at the age of 78 yrs he expects the same life expectancy for
himself. The returns on his investments during his earning life would be 13%, as he believes to be
aggressive in life. The inflation post retirement would be @ 5% and he would fetch a return of 9% in
the same period, as he would be conservative in that phase of life. He would like to know how much
amount he should invest every year. (8,65,634.3812)

2. A person-aged 40yrs has a yearly expense of Rs. 6,50,000/-, which he thinks would grow at 7% p.a.
He would also like to increase his lifestyle every year by 1.5%. He wishes to retire & stay with his
wife at the age of 60 yrs as his father died at the age of 75 yrs he expects the same life expectancy for
himself. The returns on his investments during his earning life would be 15%, as he believes to be
aggressive in life. The inflation post retirement would be @ 5.5% and he would fetch a return of 9% in
the same period, as he would be conservative in that phase of life. He would like to leave an estate of
Rs. 20lakhs for his son, so he would like to know how much amount he should invest in the
beginning of every month and the corpus required at the time of retirement.
(27,232.914) or (30,624.35)

3. A person-aged 30yrs has a monthly expense of Rs. 35,000/-, which he thinks would grow at 6%p.a.
He wishes to retire & stay with his wife at the age of 60 yrs. He expects his life expectancy to be 75
yrs. The returns on his investments during his earning life would be 12%, as he believes to be
aggressive in life. The inflation post retirement would be @ 5.5% and he would fetch a return of 9% in
the same period, as he would be conservative in that phase of life. He would like to know how much
amount he should invest every month. (8,238.40) or (9,530.41)

4. A person-aged 33yrs has a yearly expense of Rs. 5,50,000/-, which he thinks would grow at 5%p.a.
He would also like to increase his lifestyle every year by 2%. His post retirement expenses would be
15% less to his current expenses. He wishes to retire & stay with his wife at the age of 58 yrs as his
father died at the age of 70 yrs he expects the same life expectancy for himself. The returns on his
investments during his earning life would be 18%, as he believes to be aggressive in life. The inflation
post retirement would be @ 5.5% and he would fetch a return of 8.5% in the same period, as he would
be conservative in that phase of life. He would like to know how much amount he should invest in
the beginning of every month. (4,502.40) or (5,823.13)

5. Mr. Ram aged 45 saves at 9%p.a., Rs. 2,00,000 at the beginning of the year for the first 8 years and
then stops saving on account of certain financial problems. On retirement at the age of 65 years, he
intends to keep aside a sum of Rs 5,00,000 out of the accumulated amount of the above savings as
liquid money for emergencies and to invest the balance amount at 6% p.a. providing withdrawal of a
fixed amount at the end of every year for 20 years. Find the amount of annual withdrawal?

(a) 5,45,900.95
(b) 5,45,970.95
(c) 5,46,982.25
(d) 5,47,856.75

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6. Deepa Mehta aged 30, is interested in planning for retirement. She saves Rs. 15,000 per year (at the
year end) in a bank fixed deposit earning 8% p.a. compounded annually until she retires at age 60.
Her life expectancy is 80 years. What will be her corpus on the date of retirement? What is the fixed
annual amount she can withdraw at the beginning of each year until age 80, in case she wishes to
exhaust her corpus completely?

(a)14,48,974 & 1,37,498

(b) 16,24,894 & 1,50,458
(c) 16,99,250 & 1,60,252
(d) 14,91,655 & 91,613

7. Mrs. Rekha is 45 years old and plans to retire at 50. Her life expectancy is 70 years. Ms. Sushma her
Financial Planner, estimates that her client will require Rs.45000 in the first month after retirement .
Inflation rate is 4% p.a. and the rate of return is 6% p.a. What will be the savings per year required in
order to meet this?
(a) 12,45,879
(b) 14,78,951
(c) 15,89,420
(d) 16,89,745

8. Mr. Sahai has just retired from Govt. service with a lump sum of Rs 26,00,000 as retirement benefits
in total. Currently he is 59 and life expectancy for him is 75 years. He intends to take a world trip after
4 years, which would entail an amount of Rs 5 lakhs at current prices and wants to buy a new car of
Rs 3 lakhs immediately. Calculate what amount will be available to him for post retirement living
expenses in the beginning of every month, considering inflation @ 4.5 % and rate of return is 8 % p.a?
(a) Rs 11,889
(b) Rs 12,195
(c) Rs 12,090 or Rs. 12,045
(d) Rs 12,486

9. Nirav wants to retire at 45 and he wants to maintain his present standard of living. He spends Rs.
3,25,000 a year. He is expected to live upto 85. Inflation 4% expected return 7% pa . How can he
achieve this? He is at present 30 yr. What is the nest egg required at age 45 and what amount shall he
save every year to meet this plan? His present investment is Rs.10,00,000.

(a) Nest egg and saving required will be 2,51,00,065 and 5,41,093 resp.
(b) Nest egg and saving required will be 1,27,73,065 and 4,38,300 resp.
(c) Nest egg and saving required will be 13,785,155 and 4,39,780 resp.
(d) Nest egg and saving required will be 1,47,73,065 and 7,40,530 resp.

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10. Kalpesh wants to accumulate Rs.50 Lakh by retirement. He is 30 yrs and wants to retire at 55
yrs. Interest rate 9 % inflation 5% compounded yearly to be done on annuity certain basis. After
10 yrs of his saving 45000pa. Kalpesh now realizes he can now earn12 % pa on fresh investment
and also maintain a saving amount of 72000 pa for the rest of the working life. Will he be able to
accumulate the amount required? What will his corpus be.
(a) Y , 64.26 Lakh
(b) N, 48.75 Lakh
(c) Y, 52.5 Lakh
(d) N, 49.50Lakh

11. Ram aged 35 saves Rs. 30000 per year (at the end) in Bank FD earning 7% p.a. compound annually
until he retires at 60. Life expectancy is 70 yrs. Corpus on the date of retirement what is the fixed
amount she can withdraw at the beginning of each yr until 70? Presuming he wishes to leave his heirs
an estate of Rs. 150,000. Inflation rate is constant at 5% pa.

(a) 18,97,471 & 2,42,337

(b) 21,47,854 & 2,14,598
(c) 17,45,897 & 1,92,712
(d) 19,45,875 & 1,99,145

12. Mr. Nirav an affluent broker wants to retire at 45. He wants to maintain his present living
standard. He spends Rs.3,25,000/- a year. He is expected to live upto 85. Inflation is to be assumed at
4% and expected returns are 7% p.a. How can he achieve this? He is at present 30 years old. What is
the nest egg required at age 45 and what amount shall he save every year to meet his plan? His
present investments are Rs.10,00,000/- .(Assumption: All computations for interest, spend and
savings compound annually, assuming beginning of the period investment).

A Nest egg and savings required will be Rs.1,47,73,065/- and Rs.7,40,530/- respectively.
B Nest egg and savings required will be Rs.1,41,82,819/- and Rs.4,24,865/- respectively.
C Nest egg and savings required will be Rs.1, 27,73,065/- and Rs.4,38,300/- respectively.
D Nest egg and savings required will be Rs.2, 51,00,065/- and Rs.5, 41,093/-respectively

13 Alok, age 25 years, plans to retire at age 60 and his life expectancy is 75 years. His current
expenditure is Rs. 2,00,000 annually. He estimates no reduction of expenses post retirement. How
much will he save per annum to achieve his target, if inflation rate is 6% and expected yield from
investment is 10%? Assume he wishes to leave an estate of 10% of his savings at the time of
retirement.

A) Rs. 73,878
B) Rs. 9,612
C) Rs. 66,490
D) Rs. 8,651

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