Replacement Ratio Method

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Accumulation stageThe working years, in which saving and investment build the retirement corpus — the stage where the ability to take risk is highest and where time, not contribution size, does most of the work.
• Distribution stageThe retired years, in which the corpus built during working life is converted into periodic income — the stage where protecting capital matters more than growing it, because it can no longer be topped up.
• InflationA sustained general rise in the price level, which erodes what a rupee buys — and the reason a nominal return has to be deflated before it means anything.
• Pre-retirement stageThe middle of the three phases of retirement planning — the years just before and around retiring, when physical and psychological changes arrive and the rules and procedures must be learned.
• Real rate of returnThe return on an investment after the effect of inflation has been removed — what the money actually buys more of, as against the nominal percentage the product advertises.