Retirement Planning and the Retirement Adviser Role
This domain tests whether you can run a retirement planning engagement end-to-end: quantify the goal, match it to products, and act as a PFRDA-registered retirement adviser with documented suitability. The exam expects process discipline, not product tips.
Core rules and concepts
- A retirement goal is a replacement-ratio exercise, not today's expense repeated. Build in healthcare, housing, dependants, travel, and longevity to age 85–90.
- Convert nominal returns to real returns: real return = (1 + nominal) / (1 + inflation) − 1. Discount inflation-linked expenses at that rate.
- Separate accumulation from decumulation. Accumulation focuses on savings rate, asset allocation, and cost; decumulation focuses on withdrawal order, sequence risk, and income floor.
- Risk profiling must capture capacity (cash flow, horizon, dependants) and willingness. A client's stated comfort with equity cannot override a fragile cash flow.
- The adviser's role includes KYC, suitability, written rationale, conflict-of-interest disclosure, and periodic review. PFRDA registration, certification, and the prescribed code of conduct apply to retirement advisers.
Worked example
A 40-year-old spends ₹50,000 a month and plans to retire at 60. At 6% inflation, the retirement expense is ₹50,000 × 1.06^20 ≈ ₹1.60 lakh a month, or ₹19.2 lakh a year. Using a 4% initial withdrawal as a planning starting point, the corpus is ₹19.2 lakh / 0.04 = ₹4.8 crore. The reasoning: the 4% figure is a sensitivity test, not a guarantee. If the client wants an annuity floor for essential expenses, reserve part of the corpus for that and stress-test at lower returns and higher healthcare inflation.
Traps that cost marks
Using today's expenses without inflation; ignoring healthcare inflation, which typically runs above headline CPI; treating a single product as the plan; forgetting that annuity income is taxable; and failing to document a review trigger when markets or health change.