School of Commerce & Management Studies: B.

com Program

Assignment 1
INVESTMENT INDUSTRY

Name: Shanmuka Skanda A

USN: CMS21MA0028

Topic: Retirement Income Planning

Retirement planning is what a person does to prepare for life after finishing a paid job. It's not
just about finances, but in every aspect of life.

Retirement income strategies are intended to help individuals generate stable and sustainable
income throughout their retirement years. These strategies can vary depending on factors such as
financial goals, risk tolerance, market conditions, and personal preferences. Here are some
different retirement income strategies:

Different Retirement Strategies

1. Systematic Withdrawal Plan (SWP):

This strategy involves withdrawing a constant amount from retirement savings at regular
intervals, such as monthly or annually. Retirees can decide on a withdrawal rate based on factors
such as life expectancy, expected return on investment, and inflation. The main advantage of
SWP is flexibility; retirees retain control of their investments and can adjust withdrawals as
needed.

Advantages:

 Flexibility to adjust withdrawals based on changing financial needs.

 Investment growth potential if market conditions are favorable.

Disadvantages:

 Risk of exhausting retirement savings if market returns are low or withdrawal amounts are
too high
 Market volatility affects earnings stability.
2. Annuities:

An annuity is a financial product that provides a guaranteed source of income for a fixed period
or for a lifetime. The annuity can be immediate (payments begin immediately) or deferred
(payments begin at a later date).

Advantages

 Guaranteed income for life, ensuring a stable financial base.

 Protects against market volatility, as payouts are unrelated to investment performance.

Disadvantage

 Limited liquidity after purchase of annuity.

 Potential for lower returns than market investments in certain situations.

Recommendation Based On Circumstance

 For retirees with moderate risk tolerance and a desire for flexibility:
Should allocate a portion of retirement savings to an annuity to cover essential expenses and
provide a guaranteed income base. The remaining money can be invested in a diversified
portfolio. This approach ensures a balance between income stability and potential growth.

 For a retiree seeking maximum income stability

An instant fixed annuity or a premium instant annuity (SPIA) may be an appropriate option.
These annuities provide a guaranteed source of income for life or for a selected period of
time. It is essential to ensure that the annuity is purchased from a reputable supplier and to
consider options such as inflation adjustment, if available.
 For retirees comfortable with investment management and looking for
flexibility:
A systematic withdrawal plan may be more suitable. Retirees can establish sustainable
withdrawal rates based on their expected return on investment and adjust withdrawals as
needed. Regular monitoring and the ability to adjust withdrawal rates will be important.

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