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<<<Just as a clarification, isn't the idea to each year transfer one year's worth of living expenses out of equities and into cash/equivalents if the market has a good year, but if the market is down (like this year) you'd continue to leave your equities untouched and continue to just draw down on your CD's or MM funds? >>>

It has been my understanding that each year you replenish a year's worth of living expenses from equities reguardless of how the market does. The thought being, with that five year cushion in cash, you have enough time to recover from any loss to make up for that loss plus the living expenses you've been withdrawing. Obviously they're innumberable permutations on what you can do. Personally, I'm going to take 5% out of equities each year, so some years will be more and others less.

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