CFA 2006 AM Exam Qu 1

The question indicates that all dividends earned from the growth portfolio are reinvested yet it was included in as part of the post retirement income. How ever it is not uesd in the retirement year. Any explanations? Additionally the interest earnings was only used in pre retirement year but not in the year of retirement. I did not see anything in the question that suggest that the cash savings was used up. Whats up with this?