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Hi Kim,
I seem to do a spreadsheet like this everytime I have a decision that compares one investment path to another. The way I do it is to start with present day dollars and factor the growth of my investments into each cell for future years. That way I am always working with 2006 dollars in 2006 and 2015 dollars in 2015. As for inflation, I have been increasing my drawdown column needs by whatever I think inflation will be, but usually I don't even calculate it at all when I am just comparing investment alternatives. If were to get into this, I'd consider that my living expenses will be dropping as I approach 80 with less physical activities and I might need more during my early years of retirement. I do indeed figure current rates of taxes, and, to be conservative, I figure the current breaks on marginal rates will remain unchanged.

A simple way to figure future living expenses is to take whatever your expenses are now and adjust for the great retirement events (lower commuting costs, higher medical insurance, SS and Medicare finally kicking in, etc.) and then simply expand them by somewhere from 3% to 4% per year. Real life may hand us deflation or runaway inflation over the next 30 years, but you have to start somewhere. The other wild card is heavy uninsurable medical expenses for experimental medicin or prolonged nursing home care.

Good luck,

-- John
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