“How much can my spouse and I realistically spend in retirement at age 62 with $1 million saved?” Today’s hypothetical couple is asking the very question that most pre-retirees ponder when gearing up for retirement.

The answer is: it depends. It’s important not only to consider your retirement savings, but also other sources of income that will facilitate your expenses over a 20- to 30-year period. Joel Johnson, CFP® joins Better Money Boston with WCVB Channel 5 to break down the steps to determining how much money you will need in retirement.

Identify Your Guaranteed Sources of Income

Turning your retirement dreams into a reality requires some level of financial predictability and stability. Guaranteed retirement income, such as Social Security or a pension, is a key component of this. These are income streams you can rely on for the rest of your life. Once you’ve assessed where that guaranteed income is coming from and how much it will provide, you can identify any income shortfalls and start to bridge the gap with other retirement savings like a 401(k) or IRA.

Factor Inflation into Your Income Plan

Income planning must also consider the impact of inflation. There’s a very real possibility that you could spend 30 or more years in retirement. To keep up with the cost of living, it’s essential to have a comprehensive retirement income plan that gives you raises over the course of your life. This could mean a 3%- or 4%-income adjustment each year to maintain a comfortable lifestyle. For example, if you need $10,000 a month at age 62, you may need to triple that income by age 92.

Examine Your Budget

While budgeting may not be the most exhilarating task, it can give you a clear picture of both your monthly income and current and future expenses. A substantial cost to consider is healthcare, including the potential need for long-term care and any insurance or Medicare changes. Other expenses to factor into your budget include a mortgage, hobbies, travel, and anything else you plan do in retirement. A well-thought-out retirement income plan can help you make smart use of your budget and enter your retirement years with confidence.

Create a Withdrawal Strategy

Now that you’ve acquired a large sum of money, you may be tempted to start draining your accounts. But without a solid strategy, you could end up leaving money on the table. By coordinating all your accounts, you can begin to determine the most tax-efficient sequence of withdrawals. For instance, it may make most financial sense to take out money from your 401(k) first and defer Social Security as long as possible. With the guidance of a financial advisor, you can devise a withdrawal strategy that maximizes your after-tax income in retirement.