wizofoz

Right but then they take $500,000 and get the FV needed grown at inflation. Which if memory serves correct was close to $658k. That means she needs to make $658k after taxes. So the 6.8% required return is after taxes. Meaning that if the tax rate was say, 35%, then she would need to make 10.4% before taxes. So if her living expenses are $500k, then she needs $1012k in salary before taxes. $1012/$9711 = 10.4%.
And it doesnt say she needs $325k, it says she needs $500k which is the same as her salary (which is just there to throw you off). If this was when she was still working then it would be a different calculation where she receives $325k after taxes and needs $500k, so her need is $175k a year grown at inflation but this is not the case in the sample.