Financial Planning and Wealth Management - Short cases - Part I

1. Mr. Rajat Kapoor is a 30-year-old, self-employed person who has been saving Rs. 30,000 per year.
His savings earn him an interest of 8% p.a. He has been saving this amount since last 5 years. He
is estimates that he will require Rs. 3,00,000 p.a. post retirement for 15 years. He expects an
investment return of 6% p.a. during his retirement. Calculate his retirement corpus at 60? Will
this corpus be able to meet his post retirement expenses?

2. Mr. Murugan spends Rs. 3,60,000 p.a. to meet his annual living costs. He wishes to maintain the
same standard of living after retirement which will be after 15 years. Inflation in the first 5 years
is 5% p.a. and in the next 5 years it will be 4.5% p.a. while in the following 5 years it will be 5.5%
p.a. Mr. Murugan feels that at the age of 60 most of his commitments such as children’s education
and marriage will be fulfilled and therefore he requires only 75% of the expenses from age 60
onwards. How much will Mr. Murugan require as expenses post retirement?

3. Ms. Jayeta Sen is 30 years and plans to retire at 58 years. She estimates that she will require
inflation adjusted Rs. 75,000 p.m. in the first month after retirement. Inflation is 4% p.a. and
Return on Investment is 6% p.a. What will be the corpus at the time of retirement in order to
meet this need? Will her corpus be enough to fund her retirement if she saves Rs. 2,00,000 p.a.
Life expectancy is 75 years.

4. Mr. Gopala 35 years wants to retire at 60; he has a life expectancy of 75 years. Current expenses
are Rs. 3,00,000 p.a. He estimates no reduction in expenses post retirement. How much should
he save per annum to achieve his target, if inflation is 6%and yield from investment is 10%. He
does not wish to leave an estate.

5. Shalini decides to accumulate Rs. 50 lakhs when she retires. She is 30 years old and wishes to
retire at 55. Interest rate is 9%p.a. and Inflation is 5%p.a. If she could save 45000 p.a. for the first
10 years, how much does she need to save for the next 15 years to meet her retirement nest egg.

6. Sheetal received inheritance of Rs. 2,50,000, wants to withdraw equal amounts each year for the
next 7 years at 10% p.a. compounded monthly. What amount she should start withdrawing per
month?

7. Alok is 40 years old to retire at 65. Life expectancy is 75 years. He will require Rs. 15,000 in first
month after retirement. Inflation is 4%p.a.; rate of return is 7% p.a. What is the corpus required
to meet the expenses after retirement? Will the corpus be enough to meet his requirement if he
saves up to Rs. 30,000 p.a.?

8. Dhoni wants to retire at 45 and he wants to maintain his present standard of living. He spends
325000 a year. He is expected to live up to 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.

9. Mira aged 30 saves Rs. 15,000 per year in Bank FD earning 8.25%p.a. compounded annually until
she retires at 58. Life expectancy is 80 yrs. Calculate the Corpus on the date of retirement? What
is the fixed amount she can withdraw each year until 80 in case she wishes to exhaust her corpus
completely? Inflation rate is 5% pa.
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10. Himanshu has heard that changes in inflation rate might have a significant impact on his real
saving. Currently he would buy the car of his dreams for Rs. 3 lakhs. He wants to estimate the
amount he may need to buy the car in 8 years’ time. The inflation rate for the period are expected
to be 5% for 1st four years, 4 % for next four years. Value of the car is expected to fall by 10 %
every time over a period of 4 yrs. If he buys the car in 8 years then what would be the amount
that he would need to buy the car.

11. Madhav aged 35 saves Rs. 30,000 per year (at the end) in Bank FD earning 7% p.a. comp annually
until he retires at 60. Life expectancy is 70 yrs. Corpus on the date of retirement? What is the
fixed amount he can withdraw each year until 70? Presuming he wishes to leave his heirs an
estate of Rs. 1,50,000. Inflation rate is constant at 5% p.a.

12. Shreenath aged 30 years has an estimated present expense of Rs. 3,60,000 p.a. If inflation is 5%
in first ten years, 6% in next ten years, & 6.5% for rest of the years. What would be household
expenses required at age 60 years if he wants to maintain standard of living is 80% post
retirement.

13. You have been appointed as financial planner of Mr. Arijit. He is 35 years old at present and
would be retiring at age 60 yrs. He expects to live up to 80 yrs. You have to plan in such a way
that Arijit starts getting Rs. 25,000 p.m. at the end of each month after he retires and keep
receiving till his survival. If an expected return during accumulation is 7% p.a, what is saving
required per year to meet his retirement needs.

14. Ms. Shalini purchases a money back policy at age of 30 yrs. She gets survival benefit of Rs 1 lac
each in 5, 10, 15th year of policy and Rs 4,00,000 as maturity benefit at the end of 20 yrs. She
invests entire benefits of this policy at 8%p.a. What is accumulated value of this investments to
her at age 60 years.

15. Mr. Ali Fazal present age 25 yrs wants to retire at 55 yrs. Life expectancy is 70yrs. He estimates
that he will require Rs. 35,000 p.m. after retirement. Inflation is 4.5% p.a. and return on
investment is 6.5%p.a. What will be saving required p.a.?

16. Mr. Chakraborty has been very optimistic about the growth of his business and enjoys life
lavishly. At the same time, he is also planning to start saving money for his post retirement phase,
which will start at age 65. He spends Rs. 45,000 per month now and increase in standard of living
is 2% above inflation every year. He is 40 years old at present. Inflation rate is 5%p.a. and his life
expectancy is assumed to be 80 years. How much does he have to save every month from now
on if the rate of return on investments is assumed to be 13.25%.

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