When people think about retirement planning, they often focus on building savings. That’s an important first step, but it’s only the beginning. At some point, you’ll start drawing on your savings, and that’s where income planning comes in. A thoughtful income plan turns your retirement savings into a reliable cashflow stream supporting your lifestyle throughout retirement.

Before you can build a retirement income plan, you need a clear picture of what your retirement spending will look like. It’s common to hear rules of thumb like “you’ll need 80% of your pre-retirement income,” but those can be misleading. Instead, build a plan based on your specific lifestyle and goals. Every retirement is different.

And don’t get bogged down in the nitty-gritty detail. You don’t need a precise budget as much as you need one that accurately reflects the kind of lifestyle you want to maintain.

Start by identifying which expenses might go away with retirement and which could increase.

Next, break your planned retirement spending into three categories: needs (housing, food, insurance, health care, etc.), wants (travel, hobbies, dining out, etc.) and legacy (gifts to family or charity or leaving an inheritance).

This framework will help you understand where you can adjust your spending without compromising what’s most important to you.

Once you have a spending plan, you need to identify your income sources. For many, Social Security is the bedrock. The age at which you begin collecting has a meaningful impact on the benefit amount. Delaying past your full retirement age increases your monthly check by about 8% for each year you wait, up to age 70. If you’re in good health and have other income to support yourself, waiting can be worth it.

Required minimum distributions (RMDs) from retirement accounts are another important source of retirement income. RMDs begin at age 73 (or 75, depending on your birth year).

Once you know how much income you need and where it’s coming from, the next question is how to draw from your savings in a way that’s sustainable.

One common approach is the “4% rule,” where you withdraw 4% of your portfolio in the first year, then increase the withdrawal each year for inflation. It’s a simple guideline, but it may be too rigid for real life.

The bucket strategy provides more flexibility. In this approach, you segment your assets into short-, medium- and long-term “buckets.” Cash and bonds cover near-term needs, while long-term investments stay invested for growth.

Another strategy is to adjust your spending up or down each year based on portfolio performance.

No strategy is perfect, and not every strategy is good for every retiree. Your financial planner can help you figure out which is best for your particular situation, balancing your lifestyle goals with the need for long-term sustainability.

Remember to account for taxes. Coordinating withdrawals from different account types can reduce your tax burden and extend the life of your portfolio.

Inflation is another challenge. Even modest inflation can erode purchasing power over a 20- or 30-year retirement. To stay ahead, your portfolio should include growth-oriented investments — typically stocks — even as you shift into a more conservative allocation.

Some retirees value the peace of mind that comes from knowing a portion of their income is guaranteed for life. Annuities — particularly immediate or deferred income annuities — can help provide that. But annuities come with tradeoffs. They can be expensive, inflexible and hard to unwind. Before you buy one, review it with a fiduciary advisor who isn’t being paid to sell it to you.

Even a well-designed plan can be derailed by surprises, such as market downturns, medical expenses or simply living longer than expected. For that reason, your plan should include an emergency reserve and a strategy for long-term care. It’s also important to revisit your income plan regularly — at least once a year, or anytime your circumstances or goals change.

Retirement income planning is about building a life you can enjoy, with confidence that your money will last. Whether you’re approaching retirement or already there, a thoughtful income strategy can help you turn your savings into a paycheck that supports both your lifestyle and your peace of mind.

Steven C. Merrell is a managing director at Creative Planning (formerly known as Monterey Private Wealth). He welcomes questions you may have concerning investments, taxes, retirement or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road, Suite 202, Monterey, CA, 93940. Or you can email steve.merrell@creativeplanning.com. This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.