Nenorr

[Nenorr]

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It is a little confusing, and you’re right that it appears to be double counting on first sight. Despite the unfortunate wording, though, what they mean to say is that they expect their REAL living expenses to increase each year with the same level as inflation (i.e. they want to increase their real standard of living over time, they are not increasing their expenses for the purpose of keeping up with inflation there). Then, the rest should be clear – you calculate the real rate of return this way, and add inflation in order to maintain real value (so they can both increase their living standard by 4% each year and the portfolio principal keeps up with 4% inflation additionally).

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