Duboi IPS shweser


I am getting confused on when we should deduct desired expenses from the investable portfolio.

In example 2 in the schweser book 1, dubois has just retired and has 2M$ in her portfolio and she would like to spend 60,000$ in her first retirement year and provide 30,000 next year for her son.

Doesn’t this mean that the 60,000$ that she will be spent this year should be deducted from her investable portfolio (2M$) when calculating the return over the coming year?

In the shweser book they said the return over the next year is: (30,000+60,000)/2M

I would appreciate your help!

no it should not be deducted.

the phrase “in her first retirement year” implies that the $60,000 will be her annual retirement expense.

The question also asks for “return over the coming year”. Expenses should all come from the return of the portfolio.