b_sea93

1) Your spending rate is initially what you intend to spend off of the assets, your drawdown. You have to factor in the incoming cash flow (divis, interest) and net it against the outflows to figure out the liquidity requirement. The spending rate is just an assumption from your base plan.

2) Residual variance measures unsystematic risk. My understanding is that residual variance arises from taking an allocation away from the full market.

At work. I;ll have to come back later.