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Chapter 6: Miscellaneous Aspect of Retirement Planning

Advisor’s Role in Retirement Planning

Heading Subheading
Role of Investment Advisor Understanding Client’s Goals
  Identifying Financial Assets
  Creating Detailed Financial Plan
  Knowledge of Taxes & Retirement
  Plan Rules
Investment Advisor’s Advice Employer Benefits
  Pension Distribution Choices
  Suitability of Annuities
  Retirement Income Expectations
  Withdrawal Rate from Portfolio
  Guaranteed Investments
  Taxable Income Investments
  Restructuring Investments
  Paying Off Mortgage
  Reverse Mortgage
  Life Insurance Policies
Factors Considered by Advisor Time Horizon
  Investment Experience
  Investment Risk Tolerance
  Current Resources
Optimizing Investment Portfolio  

Calculations for Retirement Planning

Retirement Corpus Required

To estimate the retirement corpus required, one must take into account inflation and the expected standard of living. Below is an estimation of the retirement corpus required for an individual who wishes to retire at the age of 60 and expects to live till the age of 85.

Age at present: 35 years
Expected retirement age: 60 years
Expected life expectancy: 85 years

Assuming the current monthly expenses are Rs 10000:

Monthly expenses after 25 years (at 7% inflation): Rs 54,724
Monthly expenses during retirement (50%-60% of existing expenses): Rs 27,362 – Rs 32,668

Assuming the individual wants to maintain the same standard of living during retirement:

Retirement corpus required: Rs 2.60 crore – Rs 3.11 crore

Subheading: Factors to consider while calculating retirement corpus

Factors that can affect the retirement corpus required include:

  • Inflation rate
  • Current expenses
  • Expected standard of living during retirement
  • Expected longevity
  • Liabilities and debts
  • Medical expenses during retirement

It is important to consider these factors while planning for retirement to ensure a comfortable and financially stable retirement.

Table 1: Retirement Corpus Required

  Monthly Income (Rs) Monthly Expense (Rs) Monthly expense for Retirement (60%) (Rs) Inflation rate p.a. No. of Years to retire (60-35) Monthly expense at retirement (Rs) Life expectancy (yrs) No. of Years post Retirement (85-60) Retirement Corpus Required (Rs)*#
Person 1 20,000 15,000 9,000 7% 25 48,847 85 25 1.18 crore
Person 2 30,000 25,000 15,000 7% 25 81,411 85 25 1.97 crore
Person 3 50,000 40,000 24,000 7% 25 1,30,258 85 25 3.15 crore

Table 2: Monthly Savings Required to reach the Corpus

  Retirement Corpus required (Rs) Age to start Investment (Yrs) Time horizon of investing till retirement (Yrs)* Returns Assumed (%) Monthly Savings required to reach the Corpus (Rs)#
Person 1 1.18 crore 30 30 12 3,900
Person 2 1.18 crore 35 25 12 7,000
Person 3 1.18 crore 40 20 12 13,000

Note: Retirement age is assumed to be 60.

PMT function in excel has been used to calculate the monthly savings required to reach the corpus. The formula used is PMT(rate, nper, pv, [fv], [type]).

PV function in excel has been used to calculate the Retirement Corpus Required (Rs)*#. The formula used is PV(rate, nper, pmt, [fv], [type]). The assumptions used for the calculation are inflation rate of 6% and return on corpus at 8%.

These tables show the importance of retirement planning and how the delay in planning can impact the savings required for reaching the estimated corpus. It also highlights the impact of inflation on retirement planning and emphasizes the need to start investing early. The tables provide a clear picture of the monthly savings required to reach the desired corpus, based on the assumptions made for the interest rate and time horizon of investing till retirement.

Benefit of Stepping Up Your Investment in Accumulation Years

  • Accumulation years are filled with uncertainties.
  • Emergencies and liabilities may arise, impacting savings ability and retirement goals.
  • Most investments towards retirement are fixed contributions with limited savings.
  • Stepping up investments in accumulation years can help avoid shortfalls in retirement savings.

Stepping Up Strategy

  • Stepping up contributions periodically with regular payments or a lump sum amount.
  • Periodic step-up strategy involves starting with a fixed investment and increasing by a certain percentage every year.
  • Stepping up contributions helps in maximizing savings for retirement.
  • Can be done through investments in EPF, NPS, or mutual funds.

Investment Options

  • Eligible for employer-sponsored plans like EPF, contribute to the maximum amount.
  • Aged 50 years and above, consider investing through Voluntary Provident Fund.
  • No limit to invest in NPS, invest beyond employer’s contribution through SIP or lump sum contributions.
  • Mutual funds offer an option of step-up SIPs, where contributions increase after a specific period, taking into consideration current income, prospective yearly increments, and financial goals.

Benefits of Stepping Up Strategy

  • Helps reach required retirement goals with limited resources.
  • Stepping up contributions helps in increasing the investment proportionally as income increases, leading to compounding of one’s wealth.


  • Mr. A needs to accumulate a retirement corpus of Rs 2.0 crore in 20 years.
  • Assuming a rate of return of 12% per annum, he will need a monthly fixed savings of Rs. 22000 to reach the desired goal.
  • If he steps up his monthly contributions by 7% annually, the fixed contribution required is Rs 13000, optimizing his savings.

Impact of Pre-Retirement Withdrawals and Benefit of Transferring Retirement Corpus

Topic Subtopic Key Points
Pre-Retirement Withdrawals Impact on Retirement Corpus – EPF withdrawal before retirement impacts the accumulation of the retirement corpus.
– It may result in a shortfall in retirement funds, forcing one to work longer or reduce their lifestyle.
– Withdrawal from long-term investment, like EPF, can result in a significant loss of interest.
– Mr. E may lose Rs. 9 lakhs of interest if he withdraws Rs. 75,000 from his EPF account.
Transferring Retirement Corpus Benefit of Transferring Retirement Corpus from One Employer to Another – Retirement benefit products provide an excellent product, but switching jobs results in losing benefits.
– Having multiple EPF accounts has operational and taxation issues.
– EPF can be transferred completely online through UAN, and updating personal details is necessary.
– NPS has an easier process of transferring corpus to a new employer.
– PRAN under the ‘All Citizens’ model can be continued if the new employer is not a registered entity.
Taxability Clause Taxability of EPF and NPS Corpus – EPF becomes taxable if withdrawn before five years of continuous service.
– The same period with the old employer is added to the service period with the new employer.
– The old EPF account must be transferred to the new employer account.
– NPS corpus is locked till the age of 60, and only 20% can be withdrawn before the vesting age.
Compounding Effect Benefit of Transferring Retirement Corpus from One Employer to Another – Corpus lying with the old employer continues to earn interest till the age of 58 years.
– EPF provides tax-free returns and compounding interest, making it more beneficial to continue earning on the accumulated corpus.
– By transferring the old retirement corpus, one can remain on the same path as planned earlier and reach their desired retirement goals without any major impact on other financial goals.

Criteria to Evaluate Retirement Benefit Products

Life Stage Objective Evaluation Factors
Pre-Retirement Accumulation 1. Cost
2. Return
3. Risk
4. Tax Efficiency
Retirement Income Generation and Corpus Growth For Income Generation:
1. Inflation
2. Capital Protection
For Corpus Growth:
1. Cost
2. Return
3. Risk
4. Tax Efficiency
Post Retirement Income Generation and Capital Protection 1. Protection of Capital
2. Low Return with Least Risk
3. Leaving Money for Heirs
  • Pre-Retirement: At this stage, the focus is on accumulation of retirement corpus. Products that allow money to grow even though downside risk may be there are suitable. Products should be evaluated based on cost, return, risk, and tax efficiency.
  • Retirement: At this stage, the need will change as there will be a requirement of steady income along with growth of the accumulated corpus. Two types of products will be required – one which can generate income and other which can grow the corpus. Income generating products should be evaluated based on inflation and capital protection, while corpus growth products should be evaluated based on cost, return, risk, and tax efficiency.
  • Post Retirement: At this stage, the objective shifts completely to generate the income, as long horizon to grow the money is no more viable. Products should be evaluated based on protection of capital, low return with least risk, and leaving money for heirs where liquidity might be the primary factor.


Philanthropy refers to the act of donating time, money, or resources to help the needy or promote a social cause. It has become popular globally, not just among the rich and wealthy but also among small income earners who want to contribute to their society.

Reasons for philanthropy:
The disparity between poor and rich is increasing in India, which has the second-largest population in the world. Poverty is on the rise, and the poor are not receiving the required attention. As a result, unless poverty and disabled issues are addressed, it will be challenging for the country to progress. It is important for everyone to contribute to this cause, not just the government.

Philanthropy for Investment Advisers:
For investment advisers, communicating with their clients about their values and passions in life is a meaningful way to strengthen client relationships. It is also a natural way of building clients’ trust in the investment adviser.

Steps for Investment Advisers:

  1. Starting the conversation: Investment advisers can initiate the conversation with clients by discussing their financial plan and asking about their personal and family values. They can suggest creating a charitable giving plan to address their clients’ social or environmental causes.
  2. Timing it right: Choosing the right moment to introduce the topic of charitable giving can make the conversation flow easily. Natural situations that could spark a conversation about philanthropy include a liquidity event, drafting or revisiting a will, a life event, or an annual client meeting.
  3. Following up: After discussing philanthropy with clients, investment advisers should follow up with resources and next steps. This is important since philanthropy can easily fall to the bottom of a busy person’s to-do list.

Mock Tests-

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Investment Advisor Level 2

Chapter 6: Miscellaneous aspects of Retirement Planning

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1. Which employer-sponsored plan allows individuals to contribute beyond the employer's contribution?

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2. Which of the following is a benefit of employer-sponsored retirement plans?

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3. What are some of the things you can do to save money for retirement?

4 / 59

4. Which of the following is a benefit of IRAs?

5 / 59

5. Which of the following is a benefit of annuities?

6 / 59

6. What is the benefit of transferring retirement corpus from one employer to another?

7 / 59

7. What is one of the strategies to avoid falling short of retirement goals during the accumulation years?

8 / 59

8. What is the impact of inflation on retirement planning?

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9. What is the taxability of EPF balance if the employee spends less than 5 years with a single employer?

10 / 59

10. Growth-oriented investments are suitable for which stage of retirement savings?

11 / 59

11. What are the benefits of starting to save for retirement early?

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12. What is the potential loss of interest if an individual withdraws from the EPF account in the pre-retirement stage?

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13. What are some of the risks of withdrawing money from your retirement savings early?

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14. Senior Citizens’ Savings Scheme is available for the retired personnel of the Defence Services (excluding Civilian Defence employees) on attaining the age of 50 years, subject to fulfilment of other terms & conditions. State whether True or False.

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15. Which retirement product provides compounding benefits and tax deduction benefits?

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16. How can you transfer your retirement savings from one employer to another?

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17. Life expectancy directly affects which of the following features of the retirement goal?

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18. Which of the following is a risk of annuities?

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19. Which retirement product allows withdrawal of 20% before the vesting age?

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20. How is the gratuity amount paid to the employee?

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21. How can an employee transfer their EPF account from an old employer to a new employer?

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22. What is the formula used to calculate the monthly savings required in Excel?

23 / 59

23. What is the benefit of transferring the retirement corpus from one employer to another?

24 / 59

24. Which retirement product has a simpler process for shifting corpus while switching jobs?

25 / 59

25. What is the formula for calculating the retirement corpus?

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26. In which life stage of retirement planning is the objective to accumulate funds?

27 / 59

27. What is the role of an investment adviser in retirement planning?

28 / 59

28. What are some of the things that an investment adviser can do to help clients plan for retirement?

29 / 59

29. What becomes the primary objective in the later years of retirement planning?

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30. What is the benefit of using a step-up Systematic Investment Plan (SIP) in mutual funds?

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31. Which of the following is a solution to manage inadequacy of retirement corpus closer to retirement?

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32. Which factor is important to consider when evaluating a retirement benefit product in the pre-retirement phase?

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33. What is the formula used to calculate the retirement corpus required in Excel?

34 / 59

34. What should I look for when choosing an investment adviser?

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35. What is an important evaluation factor for income-generating products during retirement?

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36. What are some of the things you can do to invest your money wisely for retirement?

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37. Which of the following is not a factor to consider when evaluating retirement benefit products?

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38. The retirement corpus may require review:

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39. What happens to the retirement corpus if pre-retirement withdrawals are made?

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40. What happens to the service period with the old employer when the EPF account is transferred to the new employer?

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41. How do I find a qualified investment adviser?

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42. What are the benefits of stepping up your investment in the accumulation years?

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43. A subscriber to the NPS receives the pension for income in retirement from ______.

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44. What are some of the things you should consider when planning for retirement?

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45. Which life stage of retirement planning requires a focus on generating income and protecting capital?

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46. Which of the following is a government-sponsored retirement plan?

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47. What is the impact of inflation on retirement planning?

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48. What is the maximum tenure of the Reverse Mortgage Scheme?

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49. What are some of the things you can do to ensure that you are healthy in retirement?

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50. What are some of the benefits of working with an investment adviser?

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51. What are some common mistakes people make when saving for retirement?

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52. In which of the following models of the NPS is the contribution always solely by the subscriber?

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53. Which of the following is a type of retirement benefit product?

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54. Inflation does which of the following to retirement planning?

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55. Which of the following is a risk of employer-sponsored retirement plans?

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56. What type of products are suitable for generating income during the retirement phase?

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57. Which of the following is not a government-sponsored retirement plan?

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58. Which of the following is a risk of IRAs?

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59. What is the consequence of having multiple EPF accounts while switching jobs?

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