In the CFA Curriculum, Reading 8 (Private Wealth Management), Asset Allocation Example 1 in blue box it mentions that the person’s base salary is $500,000 and then mentions in another bullet point that the person “is taxed at 35% on all salary, investment income and realized capital gain”. So this makes me think that the $500,000 is gross of tax.
However, to calculate the after-tax return requirement at retirement age (in 7 years), they adjust the 500,000 for annual constant inflation of 4%, which brings the 500,000 to 658,000. They then use this 658,000 in their after-tax return requirement calculation, but to me this is still gross of tax, so I’m thinking they should tax this 658,000 by 35% to get an after-tax figure and then use this figure in their after-tax return requirement calculation.
Could someone please explain this to me?