Which of the following best describes 'net investment return' as used in calculating capital for income replacement?

Net investment return refers to the actual yield an investor receives from their investments after accounting for any costs associated with managing those investments, including taxes and expenses. In the context of calculating capital for income replacement, it is essential to understand that the net investment return provides a more accurate picture of the financial resources available after necessary deductions.

When determining how much capital is needed for income replacement, an individual must consider the real return they can expect to keep after covering any associated costs. This means calculating the gross investment returns generated by assets and then subtracting any taxes owed on those earnings and any expenses related to managing the investments, such as fees to financial advisors or fund management fees.

Thus, option B, which describes net investment return as "investment return minus taxes and expenses," accurately captures this concept, ensuring that the calculation reflects the true economic benefit available for income replacement purposes. Knowing the net investment return is crucial for effective financial planning and ensuring sufficient funds are available to replace lost income.