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Stephanie - Thanks for the help.

Did you include taxes in the living expenses?

I can only wish. :) Taxes are probably about 0.3X/year. I can say with some certainty that savings is around 0.4X/year, and I think the allocation between living expenses and taxes is about right.

Living expenses are probably analogous to what they will be at retirement, except that presumably health costs (whether insurance or direct) will increase substantially, and there will be some increase in relatively inexpensive travel (I'm a hosteller and love it).

past performance is no guarantee of future results...

That's my main problem with historically based simulations - as well as the statistical ideas you mentioned. I realize you have to start somewhere, but basing the future on the past is a paradigm that I'm not excited about starting from. I was an actuary for a short period of time, and probability-based simulations are more comfortable. Of course, the underlying data for those simulations is probably also historical, so one has much the same problem.

It seems to me the best system would (1) incorporate some ideas from the past, (2) try to make predictions of the future that aren't entirely based on historical information, and (3) adjust itself so that catastrophic market movements at exactly the wrong time wouldn't destroy you. Another problem with most simulations is that they assume straight line projections - for example, you assume an 8-percent return and 3-percent inflation. Just like dollar cost averaging can help you on the buy side, it can really hurt you on the sell side, if the road to your 8-percent return is sufficiently bumpy.

Thanks again for your help, Stephanie, and for giving this board a chance.

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