Archive / Investment Adviser (Level 2) / Miscellaneous Aspects of Retirement Planning

nism-series-xb-debt-allocation-percentage-at-retirement[ INVESTMENT ADVISER (LEVEL 2) ]

When Mr. Z reaches age 60, his general debt portfolio stands at Rs. 1,80,37,404, his general equity portfolio is Rs. 79,60,886, and his retirement corpus of Rs. 48,65,914 is reinvested 100% in debt. What is the total percentage of Mr. Z's overall portfolio allocated to debt at retirement?

[ A ]70.51%

[ B ]72.76%

[ C ]74.21%[ CORRECT ]

[ D ]76.29%

Takeaway

Combining the general debt portfolio with the fully-debt retirement corpus and dividing by total assets gives a debt allocation of 74.21% at retirement, so option C is correct.

Derivation

Total debt = general debt (Rs. 1,80,37,404) + retirement corpus reinvested in debt (Rs. 48,65,914) = Rs. 2,29,03,318. Total portfolio = total debt + equity (Rs. 79,60,886) = Rs. 3,08,64,204. Debt allocation % = 2,29,03,318 / 3,08,64,204 x 100 = 74.21%. This question tests whether the retirement corpus — even though tracked separately in the case — must be folded into the debt bucket for an asset-allocation view, a step candidates often skip when they treat the retirement corpus as a distinct fourth asset silo.

Why the others fail

A — 70.51%

Understates the true debt weighting because it excludes the Rs. 48,65,914 retirement corpus (which is 100% debt) from the total debt numerator.

B — 72.76%

Understates the debt share because it omits the compound interest credited to the general debt balance in the final pre-retirement year.

D — 76.29%

Overstates the debt weighting, implying equity is either under-counted or the 15% equity compounding was misapplied to inflate the denominator disproportionately.