Retirement Planning Workbook

10. (a) 23% curtailment Current annual living expenses= 70,000 *12 = 840,000 Inflation adjusted expenses estimated at retirement = 25,85,716.688 (set begin , n= 21(55-34); i=5.5; PV=-840,000, FV(solve)=25,85,716.688 ;P/Y=C/Y=1) Retirement corpus estimated (considering her life expectancy as 85 years) Inflation expected post retirement = 5% Post retirement period (considering life expectancy as 85 years) = 30 (85-55) Real rate of return = 1.90476 {(7-5)/1.05} Estimated retirement corpus = 59794131.10 ((set begin, n= 30; i=1.90476; PV(solve) =- 59794131.10,PMT=25,85,716.688 ;P/Y=C/Y=1) Retirement corpus required if provision is made for 5 more years of expected life and investment rate is 6% Post retirement period (considering life expectancy as 90 years) = 35 (90-55) Real rate of return = 0.952380 {(6-5)/1.05} Estimated retirement corpus = 77384779.17 ((set begin, n= 35; i=0.952380; PV(solve) =- 77384779.17,PMT=25,85,716.688 ;P/Y=C/Y=1) Curtailment of expenses required on retirement if provision is made for 5 more years of expected life and investment rate is 6%= 23%{1-(59794131/77384779)} 11. Solution: (b) Set Begin(In Reverse Mortgage case, begin mode is considered) N=180 (15*12) I= 13.75 PMT(solve)= 10,703.21 FV=- 64,00,000 (80,00,000*.80) P/Y=12 C/Y=12 Fixed periodic monthly payments he stands to receive under the reverse mortgage scheme = Rs.10,703.21 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 151

12. (c)Rs.3.51 lakh net liability due to Reverse Mortgage Loan Value of Reverse Mortgage Loan Eligible = Rs.6,400,000 Rate of Interest = 13.75% p.a. Term = 15 years Monthly payments under reverse mortgage = Rs.10,703 (set begin, n=180, I=13.75, FV=- 64,00,000; P/Y=12; C/Y=12) Fixed pension =15,000 Rs.p.m. Current household expenses = 16,000 Rs.p.m. End of year 1 Excess funds available for investment: End of year 1 = 116,439 Rs.((10703+15000)-16000)*12 End of year 2 Household expenses in the 2nd year = 16,960 p.m. (16000*(1+6%) Excess funds available for investment: End of year 2 = 233,001 ((10703+15000)- 16960)*12+116439*(1+10%) End of year 3 Household expenses in the 3rd year = 17,978 Rs.= 16960*(1+6%) Excess funds available for investment: End of year 3 349,008 Rs.((10703+15000)- 17978)*12+233001*(1+10%) End of year 4 Household expenses in the 4th year = 19,056 (17978*(1+6%) Excess funds available for investment: End of year 4 = 463,673 ((10703+15000)- 19056)*12+349008*(1+10%) End of year 5 Household expenses in the 5th year = 20,200 {19056*(1+6%)} Excess funds available for investment: End of year 5 = 576,083((10703+15000)- 20200)*12+463673*(1+10%) Mortgage Loan and interest outstanding: End of Year 5 = 926,830 (Set= begin, n=60(5*12); i=13.75; PMT=-10,703; FV(Solve)=926,830.3029; P/Y=12; C/Y=12) Net Liability due to Reverse Mortgage Loan = 350,747 (926830-576083) CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 152

13. (a) BB; it offers 15 basis points/ annum better than AA Page 153 Annuity from product AA. Cash Flow Year Value 1 -100000 2 8640 3 8640 4 8640 5 8640 6 8640 7 8640 8 8640 9 8640 10 8640 11 8640 12 8640 13 8640 14 8640 15 8640 16 8640 17 8640 18 8640 19 8640 20 8640 21 8640 22 4320 23 4320 24 4320 25 4320 26 4320 Calculate IRR = 6.53% CFP Level 2 - Module 1 – Retirement Planning - Workbook

Annuity from product BB. Value Cash Flow -100000 Year 7010 1 7010 2 7010 3 7010 4 7010 5 7010 6 7010 7 7010 8 7010 9 7010 10 7010 11 7010 12 7010 13 7010 14 7010 15 7010 16 7010 17 7010 18 7010 19 7010 20 7010 21 7010 22 7010 23 7010 24 100000+7010 25 26 Calculate IRR = 7.01% CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 154

Difference in yield offered by both the product: 0.48 (7.01 – 6.53) 14. 11.69% Step 1: Calculate the amount currently accumulated after saving Rs.30000 p.m. for last 5 years. Set Begin, N=5, I=8, PV = 0, PMT= -30000, FV (solve) = 190077.8711; P/Y=1, C/Y=1 Step 2: Calculate the retirement corpus required Set Begin, N=25(75-50), I=6, PV (solve) = 40,65,107.258, PMT= -300000, FV = 0; P/Y=1,C/Y=1 Step 3: Calculate the rate of return Set Begin, N=20, I (solve) = 11.69, PV= -190077.8711, PMT = -30000, FV=40,65,107.258, P/Y=C/Y=1 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 155

ADDITIONAL PRACTICE QUESTIONS 1. A person at age 57 has accumulated Rs.50 lakh towards retirement funds and opts for premature retirement. He purchases an immediate annuity for a total term of 20 years, a fixed monthly amount for the initial period of 10 years and a provision to double the monthly amount in the second 10-year period. If the minimum yield guaranteed in the annuity is 8% p.a., what monthly amount he is expected to receive in the subsequent 10-year period? 2. Anamika, age 42, would retire at age 60years. She wants to accumulate a fund exclusively for retirement, considering her life expectancy to be 75 years. Her current monthly household expenses are Rs.39,000. She wants to get an inflation adjusted monthly income (assume inflation rate as 6%p.a.) to extent of 60% of her present monthly expenses and would not leave any estate in the end. You have advised her to invest monthly in Debt MF and Equity MF in the ratio of 30:70 till she completes 55 years. You have further advised her to rebalance the portfolio from the beginning of 56 years in the ratio of 60:40 along with further monthly investment to be in the said revised ratio till she retires. The accumulated funds at the time retirement would be invested in a risk free investment. How much amount should she invest monthly starting from onwards?( Roi in equity 14% p.a., debt fund 9% p.a. and risk free 7.5% p.a.) 3. Priya, aged 38 years, is a spinster by choice and a freelance journalist for past 12 years in media industry. Being a freelancer she is more worried about her retirement and ongoing monthly expenses. Now she wants to make an arrangement so that one-third of her present living/personal monthly expenses of Rs.30,000 per month can be met for the next 17 years till she stops earning at the age of 55 years, and thereafter the whole of her current living/personal monthly expenses all adjusted to inflation till she is alive. She wants to know what approximate lump sum amount she is required to invest in risk free instruments in order to ensure- such cash flows from the beginning of next month. (Assume Inflation rate as 5% p.a., Risk Free rate as 7.50% p.a and Life expectancy as 75 years). 4. Ankit, aged 29 years wishes to retire at age 58. He wants to supplement his retirement corpus by regularly investing in his PPF A/c Rs.15,000 every quarter till its maturity after 4 years, as well as throughout its four extensions each of 5-year blocks. The amounts are proposed to be invested in the first five days of April, July, October and January every financial year beginning immediately. Ankit wants to know the approximate maturity amount of his PPF A/c after the proposed four block period extensions, if the current PPF balance is 290,000. The same would be _______.( PPF ROI 8.1% p.a. ) CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 156

5. You advise your client aged 31 years to accumulate corpus of for retirement. The client already has in Balanced MF scheme Rs.1.60 lakh which you advise to extend to achieve this goal. You advise him to start SIP of Rs.5,000 every month till his age of35 years, thereafter increase the same to Rs.7,500 p.m. till his age 40 years, Rs.10,000 p.m. between 40 – 50 years, and Rs.15,000p.m. between 50 – 56 years. You advise him to switch 25% of outstanding Balanced MF portfolio every year to Liquid schemes from age57 until full redemption on retirement at age 60. How much of the retirement corpus would he be able to accumulate? (Rate of return Balanced MF 9% p.a., Liquid MF 5.5% p.a.) 6. You suggest your client Mr. Chand to limit his annual investment in the PPF A/c in such a way that he invest just Rs.150,000 in the beginning of April every in his PPF A/c for remaining 5 years to its maturity excluding this. The current financial year’s deposit of Rs.150,000 was done on 1-Dec. The PPF balance as on 31st March of the current FY is 4.27 lakhs. Consider 8% rate of interest effective April 2016, you estimate the gross corpus on maturity after 6 years from now to be ________________. 7. A person invested Rs.45 lakh in a 30-year fixed monthly annuity providing a yield of 9% p.a. What will be the amount of monthly annuity if the start date is deferred by 3 years? 8. A 28 year old starts to save for his retirement at the age of 60. You advise him to take maximum advantage of equity in initial stage. The strategy is to invest Rs.5,000 per month in equity scheme. After 5 years, start another monthly investment of Rs.5,000 in a debt scheme while continuing with equity scheme till 60. At his age of 40, switch 50% of accumulated equity investments to debt scheme while increasing debt investment by Rs.10,000p.m.. 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.22,000 per month, roughly how many years his corpus will last? Equity - 9.5%, Inflation - 5.5% and Debt - 7.5% 9. A research organization instituted scholarship amounting to Rs.10 Lakh / year (End of each year) on a perpetual basis 3 years ago. They set aside a designated corpus for the same in investment yielding 7.5% pa. They want to raise the amount of annual scholarship by Rs.5 Lakh per annum while the expected annual yield depressed by 1%. What additional funds need to be infused in the corpus? (End mode to be used) CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 157

10. A client invests Rs.1 lakh per annum 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. He wants to buy an annuity product for a term of 20 years post retirement 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%? 11. A 25 year old lady plans to retire at 60. Her life expectancy is 85 years and living expenses estimated on her retirement are Rs.35000 per month at current cost. Such expenses would be required in line with inflation which is estimated @ 5.5% pa. throughout. The retirement corpus is supposed to be invested in an asset allocation yielding 7.5% pa., If she is starting today with an investment horizon returning on an average 8.5% pre-retirement. What monthly investment is required to achieve this goal? 12. Kapil, age 45 years, wishes to retire at age 60. His currently monthly household expenses are Rs.40,000 p.m. He expects his post retirement household/living monthly expenses to be 75% of pre-retirement expenses and he expects to live till the age of 80 years. You advise him to invest the retirement corpus in a pension scheme of a mutual fund yielding 10% p.a. during post retirement period to get such inflation adjusted monthly expenses. What approximate corpus Kapil should have for his retirement 15 years hence to accommodate his post retirement household/living expenses? (Assume this pension scheme would make monthly payments in annuity due mode and inflation is 5.5%). 13. 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 life long fixed monthly pension of Rs.20,000. His current monthly expenses are Rs.42,000. If he can contribute towards retirement fund Rs.20,000 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 ____________ 14. A client has 600,000 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. 15. Mr. A has invested annually Rs.2.00 lakh towards his retirement in an aggressive fund from his age of 40 onwards. After initial period of investment, the fund could generate return of just 3.5% p.a. in past 10 years. He can direct a higher amount towards retirement goal in the remaining 10 years to retirement. You advise to switch half of the accumulated funds along with fresh CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 158

investment in a debt fund with indicative return of 8% p.a. in the future. To achieve a target corpus of Rs.1.2 crore, what revised amount should be invested every year in debt fund? The future expectation from aggressive fund is 11% p.a.? 16. Omprakash, aged 49 years wishes to retire at age 62. His current annual household expenses are Rs.780,000. Post-retirement, he would require 70% of his current personal annual expenses adjusted for inflation in the beginning of first year of his retirement till his life expectancy of 80 years. He wants to leave Rs.50 lakh, at then prices, for his children as estate. He wants to know what monthly amount towards his retirement corpus and estate is required to be invested in an Equity oriented MF from today onwards till his retirement. In the distribution phase, the corpus is invested in a Pension fund yielding 100 basis points above risk free rate. Assumption: • Inflation rate @ 5.5% p.a. • Risk free rate of return @ 6% p.a. and Equity mutual fund return is @ 12% (CAGR) p.a. 17. A 30 years old lady plans to retire at 50. She already has financial investments amounting to Rs.18 lakh. Her current expenses are Rs.27,000 per month. She wants to cover 30 years post-retirement expenses inflation- adjusted by a suitable annuity. Average inflation is considered at 7% p.a. and the annuity is expected to yield 8% p.a. You advise to invest her current financial investments at. 9.5% p.a. If she can incrementally invest Rs.2.50 lakh annually, you optimize average rate of return to achieve this goal. The same’ is _____________. 18. Your Client started investing for his retirement goal late at age 45. On reaching 55 today he has accumulated Rs.35 Lakh which he finds insufficient on reaching age 60 if he draws 5 Lakh pa. Inflation adjusted from his accumulated corpus for 30 years post retirement if the corpus is invested @ 7.5% pa. with inflation of 5.5% pa. If prior to retirement the growth rate is 9.5% is considered for investing already accumulated funds and fresh annual investments of Rs.3.5 lakh, you estimate the period of delay retirement beyond 60 years to be? 19. Mr. X is entitled to a basic salary of Rs.50000 p.m. and dearness allowance of Rs.10000 per month, 40% of which forms part of retirement benefits. He is also entitled to HRA of Rs.20000 p.m. He actually pays Rs.20000 p.m. as rent for a house in Delhi. Compute the taxable HRA. 20. X is employed at Delhi as the Finance Manager of R Company Ltd. The particulars of his salary for the previous year 2019-20 are as under: i) Basic Salary - Rs.30000 ii) Dearness Allowance (forming part of basic salary) - Rs.10000 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 159

iii) Conveyance allowance for personal purpose – 5000 p.m. iv) Commission @2% of the turnover achieved which was Rs.2250000 during the previous year and the same was evenly spread -Rs. 45000 v) House Rent Allowance – 15000 p. m. The actual rent paid by him is Rs.10000 p.m. for an accommodation at Noida till 31.12.2019. From 1.1.2020 the rent was increased to Rs.20000 p.m. Compute taxable HRA. 21. R retires on 4.1.2020 after serving XY Company Ltd. For a period of 16 years and 11 months. At the time of retirement his basic salary was Rs.44000 p.m. and he was also entitled to Dearness Allowance of Rs.8000 p.m. On his retirement, he received Rs.600000 as gratuity. Compute the amount of gratuity exempt from tax and the amount to be included in gross salary. He is covered under the payment of gratuity act. 22. R joined the service on 1.6.2001. He retired from his services on 17.11.2019 and received gratuity Rs.1120000. at the time of retirement his basic salary was Rs.70000 p.m. and dearness allowance Rs.35000 p.m.(60% of which was part of salary). Compute the amount of gratuity exempt from tax and the amount to be included in gross salary. He is covered under the Payment of Gratuity Act. 23. An employee, drawing a salary of Rs.5000 p.m. retires from service and becomes entitled to receive pension of Rs.3000 p.m. He gets half of his pension commuted and receives Rs.60000 as lumpsum payment. Henceforth, he shall be entitled to a pension of Rs.1500 p.m. Compute the exemption available under section 10(10A) in respect of the commuted pension. He is also entitled to get gratuity. 24. A retired on 15.4.2019 from B company Ltd. He was entitled to a pension of Rs.4000 p.m. At the time of retirement he got 75% of the pension commuted and received Rs.120000 as commuted pension. Compute the taxable portion of the commuted pension if – a. He is also entitled to gratuity b. He is not entitled to gratuity 25. E, an employee of XYZ Pvt. Ltd. Retired from the company on 30.11.2019. At the time of his retirement, he received Rs.144000 as leave salary from his employer. The following information provided by the employee- 1 Salary at the time of retirement (per month) Rs.9000 2 Period of service 20 years & 8 Months 3 Leave encashment Rs.144000 4 Leave availed while in service 14 months 5 Balance unavailed leave at the time of retirement 16 months CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 160

6 Avg. salary for the months of Feb,2019 to Rs.8800 Nov,2019 7 Leave entitlement 1.5 month for completed year of service Compute the amount of taxable leave encashment. 26. R an employee of XYZ Ltd. Retired from services w.e.f. 1.1.2020 after serving for 16 years and 7 months. At the time of retirement he received a sum of Rs.50000 as leave encashment for unavailed leave of 300 days. He was untitled to 40 days leave for each year of completed service. He was getting a salary of Rs.5000 per month at the time of the retirement. He received increment of Rs.500 w.e.f. 1.7.2019. Compute the amount of leave encashment. 27. Businessman wants to achieve the goal of marriage of his daughter after 10 years. The funds required would be Rs. 25 lakh at then costs. He wants to invest monthly for the goal. You suggest an asset allocation strategy where he should invest monthly in equity and debt in ratio 65:35 for 9 years, and shift the entire accumulated amount in these funds to liquid fund in the last year. If the returns expected from equity, debt and liquid funds in this period are 12 % p.a., 9 % p.a. and 5 % p.a., respectively, what approximate amount per month is required to be allocated to equity and debt schemes? 28. You have suggested smith to set aside 10% of his equity MF portfolio(Rs.2500000) for the purpose of his abroad trip after 10 years. Current cost of abroad trip is Rs.1000000 and inflation rate is 5.5% p.a. In addition, you have advised to start monthly investments today in a ratio of 50%: 50% in balanced fund and debt fund for seven years. At the beginning of 8th year, new investment allocation will be in ratio of 30%: 70% and portfolio to be rebalanced in line with new asset allocation for balance term. Calculate monthly investment required for 10 years.(equity MF:11%, balanced MF:9% debt MF:7%) CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 161

SOLUTIONS 1. In order to calculate the expected annuity to receive in the subsequent 10- year period, we will do reverse calculation. For this we take following assumption. Step-1: For the 1st Ten year if you are likely to receive monthly annuity (PMT) of Rs.100, then what is the present value (Today) of the entire cash flow series discounted @ 8%. BGN, N=10*12, I=8, Pmt= 100, PV= Solve (-8,397), P/y=12, C/y=l Step-2: In the subsequent term of Ten year period, if you are likely to receive monthly annuity (PMT) of Rs.200 (Annuity amount will be doubled), then what is the present value of the entire cash flow series discounted @ 8%. BGN, N=10*12, I=8,Pmt= 200, PV= Solve (-16,793), P/y=12, C/y=l Step-3: The PV of Rs.16,793 is value as on Beginning of second 10 year period which will be further discounted @ 8% to get value as on Today’s date. BGN, N=10, I=8, FV= 16793, PV= Solve (-7,779), P/y=l, C/y=l Step-4: Total value of investment or rather lump sum amount required to invest Today in order to earn monthly annuity of Rs.100 in the 1st 10 year and Doubled annuity of Rs.200 in the subsequent 10 year period is Rs.16,176 (8397 + 7779). Then with Lump sum investment of Rs.50.00 Lakhs today, how much annuity can be earned on monthly basis? Will be as follow: Amount Annuity to earn 16,176 100 50,00,000 Solve (Rs.30911) (50,00,000 * 100) / (16176) The answer or annuity amount of Rs.30,911 indicates monthly annuity to be earned during 1st l0 year period. So as per question language, the annuity amount to be earned in the subsequent 10 year period will be doubled. Then annuity amount in subsequent 10 year period will be Rs.61,822 {30,911 * 2). 2. Rs.15,143 per month Step-1: Set = BGN, N= 60-42, I = 6, PV = -39000*.60, FV = Solve (66792), P/Y = 1, C/Y=1 Step-2: Set = BGN, N= (75-60)*12, I = ((1.075/1.06)-1)*100, PMT = 66792, PV =' Solve (1,08,46,318), P/Y = 12, C/Y = 1 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 162

Step-3: Finding out regular investment (Based on asset allocation) Part 1 of Step 3: Between age 42 to 55 the allocation between Debt: Equity is (30:70) respectively. So in this case we will find future value of each asset class separately. We will consider base of Rs.100 per month Future value of Debt instrument with 30% allocation: Set = BGN, N = (55-42)*12, I =9, PMT = 100*0.30, FV= 8,660.75, P/Y = 12, C/Y = 1 Future Value of Equity instrument with 70% allocation: Set = BGN, N = (55-42)*12,1 =14, PMT = 100*0.70, FV= 28,957, P/Y = 12, C/Y = 1 Combined future value of Debt and Equity = 8660.75 + 28957.61 = 37,618.36 Part 2 of Step 3: Between age 56 to 60 (i.e. 5 years, as investment are taking place at the start of the period on monthly basis), portfolio will be rebalanced in ratio between Debt (60%) and Equity (40%). It means that combined value of Debt and Equity of part 1 (Rs.37618.36) will be rebalance between Debt (60%) n Equity (40%) for future calculation. Future value of Debt instrument with 60% allocation: Set = BGN, N = 5*12, I =9, PMT = 100*0.60, PV =- 37618.36 * 0.60, FV= 39,244.60, P/Y = 12, C/Y = 1 Future value of Equity instrument with 40% allocation: Set = BGN, N = 5 *12, I =14, PMT = 100*0.40, PV = = - 37,618.36 * 0.40, FV= 32,381.01, P/Y = 12, C/Y = 1 Combined future value of Debt and Equity = 39,244.60 + 32,381.01 = 71,625.6182 Part 4: In order to calculate monthly starting from onwards will do the following: Monthly Investment Future Value 100 71,625.6182 1,08,46,318 (Required Amount) 100 * 1,08,46,318 / 71,625.6182 = Rs.15,143 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 163

3. Rs.55.40 Lakhs Part-1: Finding out present value of Rs.10,000 till retirement age Set BGN Nper 17*12 I ((1.075/1.05)-1)* 100 PV 1,683,002 (A) PMT -10,000 FV P/Y 12 C/Y 1 Part-2: Step-1- Finding out future value of Rs.30,000 till retirement age Set BGN Nper 17 I 5.00 PV -30,000 PMT 0 FV 68,761 P/Y 1 C/Y 1 Step-2: Finding out present value of the cash flow at retirement age Set BGN Nper 20*12 I ((1.075/1.05)-1)*100 PV 13,176,129 PMT 68,761 FV 0 P/Y 12 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 164

C/Y 1 Step-3: Finding out present value of the cash flow in today’s time (i.e. age 38) Set BGN Nper 17 I 7.50 PV 3,853,399 (B) PMT FV 13,176,129 P/Y 1 C/Y 1 Total amount required to fulfill her requirement at age 38 1,683,002 Present value under A 3,853,399 Present value under B 5,536,401 Total amount required to fulfill her requirement (A+B) 4. Rs.6145810.151 Current PPF account balance = Rs.2,90,000 Amount Invested Quarterly = Rs.15,000 Rate of Interest on PPF = 8.1% p.a. Years till due maturity of account = 4 years Number of years in extension blocks = 20 years (4 extensions each of 5-year blocks) Total no. of years for which investment will be made = 24 years Please note that “PPF interest is calculated monthly on the lowest balance between the end of the 5th day and last day of month, however the total interest in the year is added back to PPF only at the year-end.” CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 165

The approximate maturity amount of Ankit’s PPF account will be: Set End n 24 I 8.1 PV -290000 PMT -63037.5 (:. A) FV (Solve) 6147811.96 P/Y 1 C/Y 1 A:- Balance end of year one if saves 15000 per quarter = 15000 x 4 + 15000 x ( + ) = 63037.5 5. Current Amount in Balanced MF sch. 160,000 Rate of Return of Balanced MF scheme 9.00% % p.a. Balance at the end of age 35 (investing Rs.5000 per month for 4 years) = 513,441 (Set Begin, N=48 (4*12), I=9%, PV=-160,000, PMT= -5000, FV(Solve) = 513,441 , P/Y=12, C/Y=1) Balance at the end of age 40 = 1,354,529 (Set Begin, N=60 (5*12), I=9%, PV=-513,441, PMT= - 7500, FV(Solve) = 1,354,529, P/Y=12, C/Y=1) Balance at the end of age 50 = 5,117,523 (Set Begin, N=120 (10*12), I=9%, PV=-1,354,529, PMT= - 10000, FV(Solve) = 5,117,523, P/Y=12, C/Y=1) Balance at the end of age 56 = 10,001,947 (Set Begin, N=72 (6*12), I=9%, PV=-5,117,523, PMT= - 15000, FV(Solve) =10,001,947, P/Y=12, C/Y=1) Balance at the end of age 57 = 10,902,122 { 10001947*(1+9%)} One-fourth is redeemed and invested in Liquid sch. At this stage , i.e. at 57 years Balance at the end of age 58 years in Liquid scheme = 2,875,435 (10902122/4)*(1+5.5%) Balance at the end of age 58 years in Balanced scheme = 8,912,485 (10902122*3/4)*(1+9%) Balance at the end of age 59 years in Liquid scheme =5,384,251 (2875435+8912485/4)*(1+5.5%) Balance at the end of age 59 years in Balanced scheme = 7,285,956 (8912485*3/4)*(1+9%) Balance at the end of age 60 years in Liquid scheme = Rs.7,602,056 (5384251+7285956/4)*(1+5.5%) CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 166

Balance at the end of age 60 years in Balanced scheme = Rs.5,956,269 (7285956*3/4)*(1+9%) Balance for retirement funds at age 60 = 13,558,325 (7602056+5956269) 6. 18,55,153.5 Step-1: Find future value from 1stApr to 30th Nov. (As the interest rate is 8.%p.a, Period: 8 Months) 427000 + 427000 x = 449773.33 Step-2: Find future value from 1stDec to 31stMar . (Period: 4 Months) (449,773.33+150,000) + 599773.33 x = 615767.28 (* For FY Investment of Rs.150,000 (lump sum) is done on lst Dec) Step 3: Finding out Future value of regular investment for 5 years remaining to mature, taking rate of 8% p.a= 18,55,153.5 (BGN, N= 5, 1= 8%, PV= - 615,767.28,Pmt = -150,000, FV (Solve) = 18,55153.5,,P/y=1, C/y=1) 7. Rs.45,100 Step-1: As the requirement of monthly annuity will commences after 3 years from today. We will first find out FV of current investment amount i.e. 45 lakh, growing @ 9% p.a BGN, N=3, I=9, PV= -45,00,000, FV= Solve (5827630.5), P/y=1,C/y=l Step-2: Finding out regular monthly Annuity to earn for next 30 years from the corpus generated in Step 1 Set = BGN, N=360 (30*12), I=9, PV= -58,27,630.5, PMT (Solve) = 45,100, P/Y =12,C/Y =l) 8. (Answer: 15 years) Step-1: Calculate FV of Equity in first 5 years till age 33 (28+5) Set = BGN, N = 60 (5 *12), I =9.5, PMT = - 5000, PV = 0, FV (Solve) =381081.1306, P/Y = 12, C/Y =1 Step 2: Calculate FV of Equity and Debt at age 40 i.e. for next 7 (40-33) years A. Equity:-Set = BGN, N =84 (7 *12), I =9.5, PMT = -5000, PV = -381081, FV (Solve) =1308314, P/Y = 12, C/Y = 1 B. Debt - Set = BGN, N = 84 (7 *12), I =7.5, PMT = -5000, PV = 0, FV (Solve) =548421, P/Y = 12, C/Y = 1) Step-3: Calculate FV of Equity and Debt at age 60 for next 20 (60-40) years A. Equity - Set = BGN, N = 240 (20 *12), I =9.5, PMT = -5000, PV = -654157 (1308314*50%), FV= Solve (7429698.307), P/Y = 12, C/Y = 1 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 167

B. Debt - Set = BGN, N = 240 (20 *12), I =7.5, PMT = -15000, PV = -12,02,578 (1308314x50% +548421), FV (Solve) =13216381.88, P/Y = 12, C/Y = 1 Step-4: Add FV of Equity and Debt Total accumulated Funds = 7429698.307+13216381.88 = 2,06,46,080 Step 5: FV of expenses at the time of retirement Set = BGN, N =60-28, I =5.5, PMT = 0, PV = -22000, FV (Solve) = 122039.77, P/Y = 1, C/Y = 1 Step-6: No. of months Set = BGN, N = Solve (181.45), I =0.947867( 1.065/1.055)-1, PMT = 122039, PV = - 20646087, FV= 0, P/Y = 12, C/Y = 1 Therefore, Number of years = 181.45/12 = 15.12 years 9. Ans: - Rs.9743590 Step-1: 10 lakhs/7.5% = 13,333,333 Step-2: 15 lac's/6.5% = 23,076,923 Step-3: Step 2-Step 3 = 97,43,590.077 10. Rs.477,770.6856 Step-1: Set: Beg, N= 8, I = 10%, Pmt =1,00,000 * 60% = -60,000, P/Y=C/Y=1, Find FV: 754768.6146 Step-2: Set: Beg, N= 8, I = 7.5% Pmt= 1,00,000 * 40% = -40,000 Find FV: 449,193.9533 Step-3: Balance at age 36+8 =44, 754768.6146 + 449193.9533 = 1203962.568, Rebalancing now 50%:50% so in equity 1203962.568 * 50% = 601981.284 and the same in debt and out of 100000 now 50,000 will be invested in equity and debt Step-4: Set: Beg, N: 8, I = 10% PV = -601981.284,Pmt = -50000, Find FV = 1919374.19 Step-5: Set: Beg,N: 8, I = 7.5% PV = -601981.284 Pmt = -50000 N : 8 Find FV = 1635112.713 Step-6: Balance at age 44+8 =52, 1919374.19 + 1635112.713 = 3554486.903, Rebalancing now 40%:60% so in equity 3554486.903 * 40% = 1421794.761 and in debt 3554486.903 * 60% = 2132692.142 and out of 100000 now 40,000 will be invested in equity and 60,000 in debt Step-7: Set: Beg Rate: 10% PV = -1421794.761 Pmt = -40000 Nper: 8 Find FV = 3550922.416 Step-8: Set: Beg Rate: 7.5% PV = -2132692.142 Pmt = -60000 Nper: 8 Find FV = 4477400.074 Step-9: Balance at age 60, 3550922.416 + 4477400.074 = 8028322.49 Step-10: Lets assume survival upto 80 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 168

Set: Beg Nper: 20 PV = -8028322.49 Rate: Real Rate of return: between 6.5% and 4.5% =1.91, P/Y=C/Y=1 Find Pmt: 477,770.6856 11. Rs.22,595 Step-1: Set = BGN, N= 60-25, I = 5.5, PV = -35000, FV = Solve (227983.87), P/Y = 1, C/Y = 1 Step-2: BGN, N= 300 (85-60)*12, I = ((1.075/1.055)-l)*100, PMT = -227983.87, PV = Solve (54625646.5), P/Y = 12, C/Y = 1 Step-3: BGN, N= 420(60-25)*12, I =8.5, PMT = -22595, FV =54625646.5, P/Y = 12, C/Y=1 12. (Answer: Rs.110 Lakhs) Step-1: Set = BGN, N= 15 (60-45), I =5.5, PV = - 40,000*.75, FV = Solve (66974.2947), P/Y =1, C/Y= 1 Step-2: BGN, N= 20 (80-60)*12, I = ((1.10/1.055)-1)*100, PMT=66974, PV = Solve (10,915,121), P/Y = 12, C/Y =1 13. Answer: Shortfall of Rs.7.18 Lakhs) Step-1: FV of today monthly expense at the time of retirement Set = BGN, N=5, I=6, PV=-42000, FV= Solve (56205.48), P/Y=l, C/Y=l Step-2: PV of the entire cash flow requirement during the post - retirement phase. Set = BGN, N=360 (30*12) (As stated in the question, to provide 30 years postretirement expenses inflation-adjusted), I= 1.41509 ((1.075*/1.06)-l)*100, PV= Solve (1,65,19,897.27), PMT= 56205.48, P/Y=12, C/Y=l *Rate of Return of Annuity (Post Retirement) will 6% + 1.5% = 7.5% Step-3: PV of the entire cash flow receivable (pension from Employer)during the post - retirement phase. Set = BGN, N=30*12 (As stated in the question, to provide 30 years postretirement expenses inflation-adjusted), I=7.5, PV= Solve (29,48,371.77), PMT= 20,000, P/Y=12, C/Y=l Step-4: FV of ongoing investments at the time of retirement age. Set = BGN, N=5*12, I=9.25, PV= -60,00,000, Pmt= -20,000, FV= Solve (1,08,52,949.470), P/Y=l2, C/Y=l CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 169

Step-5: 16,519,897.267 Amount Required For Retirement Life 2,948,371.776 Less: PV of Pension income at Retirement Age 2,000,000.000 Less: Lumpsum Benefits from Employer Less: FV of regular & Current Invt at Retirement Age 10,852,949.470 Shortfall in Corpus required 718,576.021 14. Ans . 2244736.507 Investment-1: Pmt: 6,00,000 * 10% = 60,000 Rate: 8.5% Investment-2: Pmt: 600000 * 2% = -12000 Rate: 12% Step-1:Set: Beg, Pmt: -60000 Rate: 8.5% Nper: 5, P/Y=C/Y=1, Find FV = 385741.7709 Step-2: Set: Beg Pmt: -12000 Rate: 12% Nper: 5, P/Y=C/Y=1, Find FV = 85382.26852 Step-3: 385741.7709 + 85382.26852 = 471124.0394 Step-4: Set: Beg PV = -471124.0394 Pmt: -60000 Rate: 8.5% Nper: 5 Find FV = 1094150.585 Step-5:Set: Beg Pmt: -12000 Rate: 12% Nper: 5 Find FV = 85382.26852 Step-6: 1094150.585 + 85382.26852 = 1179532.854 Step-7: Set: Beg PV = -1179532.854 Pmt: -60000 Rate: 8.5% Nper: 5 Find FV = 2159354.238 Step-8:Set: Beg Pmt: -12000 Rate: 12% Nper: 5 Find FV = 85382.26852 Step-9: 2159354.238 + 85382.26852 = 22,44,736.507 15. (Answer: Rs.3.79 Lakhs) Step-1: Current value of regular investments of Rs.2.00 Lakhs p.a. of last 10 years growing @ 3.5%. Set = BGN, N=10, I=3.5, PMT= -2,00,000, FV= Solve (24,28,398), P/Y=l, C/Y=l Step-2: Rebalancing of the portfolio As per question language, for the remaining period to retirement (i.e. 10 years), the accumulated funds in Step 1 will be rebalanced between Equity and Debt in the equal ratio, (i.e. 50:50) Rebalancing of the portfolio value • Debt = 24,28,398 * 50% = 12,14,199 • Equity= 24,28,398 * 50% = 12,14,199 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 170

Step-3: Future value of equity investment. As per question, equity portion of the portfolio, i.e. Rs.12,14,199, will continue to grow @ 11% p.a. without any regular investment till the remaining period to retirement (10 years from now) Set = BGN, N=10, I=11, PV=-12,14,199, FV= Solve (34,47,622), P/Y=l, C/Y=l Step-4: Regular Investment in Debt Corpus required at retirement age (As per question) 1,20,00,000 Less: Future Value of Equity portion of investment (Step 3) 34,47,622 Shortfall 85,52,377 The shortfall amount of Rs.85,52,377will be accumulated with the help of regular yearly investment in Debt Fund portfolio during the accumulation period, i.e. from age 40 to age 50 So we have to find out, regular investments to be done on yearly basis in Debt Fund taking into account the current value available in Debt Fund after rebalancing the portfolio (Step 2) Investment rate for Debt Fund is 8% p.a. Set =BGN, N=10, 1=8, PV= -12,14,199, FV=85,52,377 (Shortfall Amount), PMT= Solve (3,79,087), P/Y=l, C/Y=l 16. Ans (Rs.53,125 per month) Step-1: Set = BGN, N= 62-49, I = 5.5, PV = -7.80 lakhs* 0.70, FV = Solve (10,95,153), P/Y = 1, C/Y = 1 Step-2: Set = BGN, N= (80-62), I = ((1.07/1.055)-1)*100, PMT = 1095153, PV = Solve (A), P/Y = 1, C/Y = 1 Note: Return on investment will be 100 base points more than Rf. So Return will be 7% (6% + 1%) Step-2: To find PV of future estate amount of Rs.50.00 lakhs Set = BGN, N= (80-62), I = 7, FV = 50,00,000, PV = Solve (B), P/Y = 1 , C/Y = 1 Total corpus required at retirement age will be sum of (A + B) = Rs.1,90,09,864.58 Step-3: Finding out regular investment Set = BGN, N = (62-49)*12, I = 12, FV = 19009864.58, PMT (Solve)= 53124.88, P/Y= 12, C/Y =1 17. Ans 12.61% Step-1:FV of today monthly expense at the time of retirement Set = BGN, N=20, I=7, PV=-27000, FV= Solve (1,04,481), P/Y=l, C/Y=l Step-2: PV of the entire cash flow requirement during the post - retirement phase. CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 171

Set = BGN, N=30*12 (As stated in the question, to provide 30 years postretirement expenses inflation-adjusted), 1= ((1.08/1.07)-1)* 100, PV= Solve (3,28,33,627), PMT= 104,481, P/Y=12, C/Y=l Step-3: FV of current investment. Note: - As per question, “Current investment amount of Rs.18.00 Lakhs is allocated towards Retirement goal” and is growing @ 9.25% p.a. Set = BGN, N=20, I=9.5, PV = -18,00,000, FV= Solve (11054901),P/Y=l, C/Y=l Step-4: Finding out rate of return for regular investment Corpus required during post retirement period (Step 2) 3,28,33,627 Less: Future Value of Current investment (Step 3) 1,10,54,901 Shortfall 2,17,78,726 The shortfall amount of Rs.2.17 crore will be accumulated with the help of regular yearly investment of Rs.2.50 Lakhs during the accumulation period, i.e. from age 30 to age 50. So we have to find out, at what investment rate Mrs. A will be able to accumulate the shortfall amount, if she starts investing Rs.2.50 Lakhs on yearly basis for next 20 years. Set = BGN, N=20, I= Solve (12.61), PMT= -2,50,000, FV= 3,28,33,627 -1,10,54,901, P/Y=l, C/Y=l 18. Ans. 3 years 1. Find PV of Rs.5.00 Lac (inflation linked) receivable every years for next 30 years, ROR @ 7.5% inflation rate @5.5% BGN, N=30, I=(( 1.075 / 1.055)-1)*100, Pv= solve (11,575,813.66) Pmt= 50,000, P/y=l, C/y =1 2. Find out No. of years required to accumulate the given amount (PV of step 1) with ongoing regular investment. BGN, N= Solve (8.026713042), 1=9.5, Pv= -35,00,000Pmt= - 350,000, FV=11,575,813.66 P/y=l, C/y =1 3. Current age 55 + Additional 8 years required = Age 63 4. Retirement age 60 - Age 63 = 3 Years (Revised Retirement age) 19. Salary for HRA purpose 600000 Basic salary 48000 Dearness allowance 40% of 120000 240000 1. Actual HRA received (20000x12) 175200 2. Rent paid in excess of 10% of salary (240000-64800) 324000 3. 50% of salary CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 172

Therefore Rs.175200 shall be exempt and the balance Rs.64800 shall be included in gross salary. 20. Calculation from 1.4.2019 to 31.12.2019 Salary for 9 months = 270000(basic)+90000(DA)+33750(commission) = 393750 HRA calculation for 9 months Actual HRA received = 135000 Rent paid – 10% of salary of relevant period = (90000 – 10% of 393750) = 50625 40% of salary = 157500 Exempted = 50625 Taxable = 135000 – 50625 = 84375 Calculation from 1.1.2020 to 31.3.2020 Salary for 3 months = 90000(basic)+30000(DA)+11250(commission) = 131250 Actual HRA received – 45000 Rent paid – 10% of salary of relevant period = (60000 – 10%of 131250) = 46875 40% of salary = 52500 Exempted = 45000 Taxable = 0 Total taxable HRA = 84375 + 0 = 84375 21. The exemption shall be to the extent of the minimum of the following three amounts: 1. Amount of gratuity received = Rs.600000 2. 15 days’ salary for every year of service = = Rs.510000 3. Rs.2000000 Therefore Rs.510000 shall be exempt from tax and the balance Rs.90000 shall be included in the gross salary. 22. The exemption shall be to the extent of the minimum of the following three amounts: 1. Actual amount of gratuity received Rs.1120000 2. 15 days’ salary for every year of service = = 1090385 3. Rs.2000000 Therefore Rs.1090385 shall be exempted and balance Rs.29615 shall be included in gross salary. 23. For Rs.1500 pension commuted – amount received Rs.60000 = Rs.40000 For Rs.1000 pension commuted – commuted amount shall be CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 173

Hence, if the employee is also entitled to gratuity then out of the amount of Rs.60000 received as commutation of pension. Rs.40000 would be exempt and Rs.20000 would be taxable. Besides, the uncommuted pension of Rs.1500 p.m. will also be taxable. 24. a. 75% of commuted pension is equal to Rs.120000. hence commuted value of 1/3of the Pension would amount to = Rs.53333 Therefore Rs.53333 shall be exempt and balance Rs.66667 would be taxable b. 75% of commuted pension is equal to Rs.120000. hence commuted value of 50% of pension would amount to = Rs.80000 Therefore Rs.80000 would be exempted and Rs.40000 would be taxable. 25. The minimum of the following four amounts will be exempt: 1. Leave encashment actually received = Rs.144000 2. 10 months’ average salary = 8800x10 = Rs.88000 3. Leave encashment for 6 [email protected] p.m. = Rs.52800 4. Amount specified by the government = Rs.300000 Hence Rs.52800 would be exempt and the balance of Rs.91200 would form part of gross salary 26. Rs.22400 27. Rs. 8,601 &Rs. 4,631 Amount required to be accumulated upto 9 years = 2500000/(1+5%) = Rs.2,380,952 Suppose, monthly investment made is: 100.00 Rs. Amount invested in equity funds for 9 years 65.00 Rs. 100*65% Amount invested in debt funds for 9 years 35.00 Rs. 100*35% N=9x12, I = 12, Pv=0, Pmt=-65, p/y=12, c/y=1, FV=solve(12261) Accumulation in equity funds after 9 years Rs.12,261 N=9x12, I = 9, Pv=0, Pmt=-35, p/y=12, c/y=1, FV=solve(5732) Accumulation in debt funds after 9 years Rs.5,732 Total funds accumulated in equity and debt funds 17,993 Rs. 12261+5732 Required cumulative investment per month 13,233 Rs. (2380952/17993)*(100) Investments in equity per month 8,601 Rs. 13233*0.65 Investments in debt per month 4,631 Rs. 13233*0.35 28. Current Cost of abroad trip Rs.1000000 FV of goal after 10 years Rs.1708144.46 Equity MF portfolio Rs.2500000 10% of equity MF Rs.250000 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 174

FV of equity after 10 years Rs.709855.25 Shortfall Rs.998289.21(1708144.46-709855.25) Let as assume initial investment every month is Rs.100 For 7 years balance and debt MF ratio is 50:50 After 7 year FV of balance MF Rs.5785.83 After 7 year FV of debt MF Rs.5387.26 Total accumulated fund Rs.11173.09 After 3 year FV of balance MF Rs.5577.73 After 3 year FV of balance MF Rs.12383.11 Total accumulated fund Rs.17960.84 SIP required Rs.5558 [(998289.21x100)/17960.84] CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 175

QUESTIONS 1. What are the most common types of annuities in India? a) Payable for life, Payable for joint life with spouse, Payment for a guaranteed term of 5/10/15 years b) Payable for life, Payable till child's life, Payable till 100 c) Payable for life, Payable till child's life, Payable till age 100 d) Payable for life, Payable for spouse's life, Payable till age 100 2. Which of the following is least likely to be a common tactic to reduce taxation of retirement cash flow? a) Place investments in a non-taxable savings or investment vehicle b) Move assets into insurance or annuity products c) Move to a jurisdiction with more favorable tax policies d) Move assets into taxable equities accounts 3. Do families in India plan their retirement independently of other goals/ family members? a) In India, retirement is the no. 1 goal for people b) In India, most people live on their own after retirement c) In India, most people still depend on their children partly/ fully during their retirement d) In India, most people plan their retirement independently 4. Which type of employer-sponsored plan provides the most predictable pension benefit? a) Government-approved provider b) Notional account c) Defined benefit d) Guaranteed return 5. Which of the following is not part of identifying a client's retirement objectives? a) Estimating capital required for requirement b) Creating a budget to understand their current needs c) Determining how much the client needs to fund their current lifestyle d) Determining which budget categories will not continue into retirement 6. When an individual chooses an investment account in the NPS, if he does not know what option to choose, what can he do? a) He can choose to close the account b) He can choose to invest in safe options c) He can choose the default option d) He can choose not to invest in anything 7. Mr. X has worked for 15 years at a company. How much gratuity is he entitled to? His basic is 25000, HRA is 20000. CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 176

a) 500000 b) 0 c) 389423 d) 216346 8. In the joint family system in India, what are the major benefits? a) Social insurance, Productivity, Division of labour b) Social insurance c) Social insurance, division of labour d) Social insurance, Idleness is rewarded, Minimum is guaranteed 9. Which of the following statements are TRUE in case of pension commutation: A. For a government employee, commuted pension is fully exempt. B. For a non-government employee, it is partially exempt. C. Pension received by a family member is taxed under income from other sources in family member’s income tax return. a) B and C are True b) A and B are True c) A and C are True d) All of the above are True 10. Which of the following is false regarding why a client's retirement goals may be difficult for an advisor to assess? a) The majority of individuals are very clear on what goals they would like to accomplish while in retirement. b) Envisioning a future without work may be difficult for many people to do. c) It is difficult for many people to develop concrete plans for their years in retirement. d) Many individuals have difficulty stating their future goals. 11. A client has total retirement savings of $500,000. Which amount best approximates annual retirement expenses they could sustain indefinitely with these savings? Assumed ROI = 7% a) $35,000 b) $10,000 c) $50,000 d) $20,000 12. How does employer's contribution to the employee superannuation fund benefit them? a) Contribution to the fund can be claimed as expenses and employees remain loyal to the company b) Contribution to the fund can be claimed as expenses and income is tax exempt c) Employees are more loyal as there is superannuation benefit d) Income is tax exempt CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 177

13. If Mr.X has 15 lakhs on retirement, in his Superannuation fund, how much can he withdraw tax free? a) He cannot withdraw anything tax free. b) He can withdraw 5 lakhs tax free as a lumpsum and 10 lakhs tax free if he buys annuities from them, Or he can buy annuities from the entire 15 lakhs c) He can withdraw the entire thing tax free as the limit is 15 lakhs d) He can withdraw only 5 lakhs lumpsum as taxfree, rest is taxable 14. Which of the following cannot be an example of a variable and terminable retirement expense? a) Ongoing support for family members b) Ongoing living expenses c) Supporting dependents or family members through school d) Home mortgage 15. It is important for advisors to \"plan for the worst and work for the best,\" especially when it comes to retirement planning. Which of the following strategies would help accomplish this goal? a) Decreasing the inflation factor b) Increasing investment return assumptions c) Decreasing retirement expense estimates d) Increasing the longevity factor 16. The new pension system is based on Individual Retirement Account in what ways? a) Manage his own retirement goals b) Control his wealth, See balance and manage irrespective of where he works c) Control his wealth d) See balance and manage his investments 17. Which of the following statements are FALSE in case of Senior Citizen Savings Scheme (SCSS): A. There shall be only one deposit in the account in multiple of INR.1000/- maximum not exceeding INR 15 lakh. B. A depositor cannot operate more than one account in individual capacity or jointly with spouse (husband/wife). C. Maturity period is 5 years D. Quarterly interest shall be payable on 1st working day of April, July, October and January. a) Only D is False b) Only B is False c) A and D are False d) Only C is False CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 178

18. Which of the following statements are TRUE in case of Pradhan Mantri Vaya Vandana Yojana (PMVVY): A. PMVVY is exclusively available to those who are 60 years of age and above. B. The maximum investment that can be made in PMVVY is restricted to Rs 25 lakh per senior citizen. C. The maximum monthly pension in PMVVY is Rs 9,250 per senior citizen a) A and C are True b) Only A is True c) B and C are True d) Only B is True 19. Which of the following is a pension paid to persons whose income, assets, pension income, or a combination of these falls below designated levels? a) Means-tested pension b) Flat-rate pension c) Asset-based pension d) Earnings related pension 20. Which of the following assumptions does not have a significant impact on a client's financial projections for retirement? a) Risk tolerance b) Marital status c) All of the above d) The jurisdiction in which the client lives 21. Indian families' biggest threat when it comes to structure is? a) Nuclear families b) Lack of social security c) Joint families d) Lack of Govt support 22. Which of the following is least likely to be a type of \"capital consumption\" pool? a) Preserved capital b) Medical reserve c) Lifetime income d) Capital growth 23. What components are required to develop a retirement cash flow budget? a) Assessment of current spending, anticipated increases, and retirement cash flow amounts already accumulated. b) Assessment of current spending, anticipated increases, and retirement cash flow amounts to be accumulated. c) Assessment of current debt, anticipated increases, and retirement cash flow amounts already accumulated. CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 179

d) Assessment of current spending, current debt, and retirement cash flow amounts already accumulated. 24. What factors contributed to the fall in Joint family system? a) Migration, Urbanisation b) Westernisation, Lack of socialisation c) Fall of agriculture, Westernisation d) Migration, Lack of opportunities 25. A client has total retirement savings of $500,000. Which amount best approximates annual retirement expenses they could sustain indefinitely with these savings if rate of interest 6% p.a.? a) 30,000 b) 28302 c) 35000 d) None of the above 26. Which of the following statements are TRUE in case of Pradhan Mantri Vaya Vandana Yojana (PMVVY): A. PMVVY is exclusively available to those who are 60 years of age and above. B. The maximum investment that can be made in PMVVY is restricted to Rs 25 lakh per senior citizen. C. The maximum monthly pension in PMVVY is Rs 9,250 per senior citizen 27. Which of the following statements are FALSE in case of Senior Citizen Savings Scheme (SCSS): A. There shall be only one deposit in the account in multiple of INR.1000/- maximum not exceeding INR 15 lakh. B. A depositor cannot operate more than one account in individual capacity or jointly with spouse (husband/wife). C. Maturity period is 5 years D. Quarterly interest shall be payable on 1st working day of April, July, October and January. 28. If the interest from SCSS is more than Rs..…………… then TDS is deducted at source on interest. A. Rs.50000 B. Rs.30000 C. Rs.10000 D. None of the above 29. Mr. X has worked for 15 years at a company. How much gratuity is he entitled to? His basic is 25000, HRA is 20000. A. 216346 B. 187500 C. 248978 CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 180

D. NONE OF THE ABOVE 30. How is the contribution by the Employee and Employer to the EPS, EPF and EDLI made? A. The contribution of employees is calculated as: – For EPF – 12% For EPS – None For EDLI – None. The contribution of Employer is calculated as: – For EPF – 3.67% For EPS –8.33% or Rs. 1,250/- For EDLI – 0.50% or max Rs. 75/- B. The contribution of employees is calculated as: – For EPF – 12% For EPS – None For EDLI – None The contribution of Employer is calculated as: – For EPF – 12% For EPS – None For EDLI – 0.50% or max Rs. 75/- C. The contribution of employees is calculated as: – For EPF – 10% For EPS – 2% For EDLI – None The contribution of Employer is calculated as: – For EPF – 3.67% For EPS – 8.33% or Rs. 1,800/- For EDLI – 0.50% or max Rs. 75/- D. The contribution of employees is calculated as: – For EPF – 12% For EPS – None For EDLI – None The contribution of Employer is calculated as: – For EPF – 3.67% For EPS – 10% or Rs. 1,250/- For EDLI – None 31. Mr X and Mr Y joined their first company after college in the year 2014. In the year 2025 Mr X wanted to withdraw his PF balance for his marriage whereas Mr Y wanted to withdraw his PF balance for his home loan repayment. What % of their PF balances can they withdraw? a) Mr Y 50% & Mr X 100% b) Mr Y 50% & Mr X 90% c) Mr Y 100% & Mr X 50% d) Mr Y 90% & Mr X 50% ANSWERS TO QUESTIONS 1. d 2. d 3. c 4. c 5.b 6. c 7. d 8. a 9.d 10. a 14. b 15. d 16. b 17. b 11. a 12. b 13. b 21. a 22. b 23. a 24. a 28. a 29. a 30. a 31. d 18. a 19. c 20. a 25. b 26. a & c 27. b CFP Level 2 - Module 1 – Retirement Planning - Workbook Page 181