Page 174 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 9: Retirement Planning-I

Self Assessment Notes

Fill in the blanks:
6. The power of …………………….works when it comes to taxes, too.
7. One of the most important determinants impacting how large your nest egg can get is the
…………………..you let your savings grow.
8. Term life insurance is usually limited to ……………replacement.
9. ……………….insurance also includes an investment component and builds cash value
against which you can take a loan out.
10. There are several ….....options that can be used to achieve your retirement savings goals.

Case Study Can a Property Investment Guarantee Comfortable
Retirement?

ashpal, 40, is going to retire after 20 years. Like everyone, he too wishes a
comfortable retirement life and for that he wants to make an investment that
Ywould fetch him big money. He is certain that the realty sector would do well in
the years to come, so instead of going for conventional financial tools like FD and mutual
funds, he is considering investing in a property. He believes that he will receive adequate
funds by selling the property upon his retirement that will be sufficient to take care of his
post-retirement expenses.
Whether Yashpal is right or wrong, we will know only after a detailed analysis of the both
pre-retirement and post-retirement conditions, for which we will use the following diagram.

What is the total amount needed by Yashpal post retirement?
Yashpal wants to accumulate funds to meet his post-retirement expenses which are basically
going to be in two forms – monthly and lump sum. Let us, therefore, consider both of
them separately.

Monthly expenses
Let us assume that Yashpal’s monthly expenses are ` 28,000 (approx.) at today’s prices. If
there is an annual increase of 5 per cent in the inflation rate, the monthly expenses for
Yashpal post retirement would be as follows:
Age (yrs) 40 60 70 80
Monthly Expenses (`) 28,000 74,292 1,21,014 1,97,120
Contd...

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