I get confused as to when you should use year 1 cash flows vs year 0 cash flows for return objective.

For example, a retiree has annual living expenses of $200,000. They have a portfolio worth $4,000,000 today and expect inflation to be 2.5%. In 35 years when they expect to die they wish to give $3 million to charity.

Calculate the return objective.

This is an IRR style return objective question: PV = -4,000,000, PMT = N = 35, FV = 3,000,000 CPT–> I/Y

for PMT how do I know whether to use 200,000 or 205,000 (200k x 1.025) ?

When would I use 200,000? ever?