First question…always a good sign.

Soi they calculate the real investment income that is needed to satisfy expenses as:

300,000(1.025) - 125,000(0.70) = 220,000

Fine.

Then they say the rea after-tax rate of return is 220,000 / 11,000,000 = 2.00%.

My question is, doesn’t he need to pay tax on whatever income he makes to get to 220,000?

So the before tax investment income would be: 220,000 / 0.7 = 314,286

That means the real after tax return is 314,286 / 11,000,000 = 2.86%

Then adjust for inflation and the answer is:

(1.0286)(1.025) - 1 = 5.43%