A retirement income plan is a timeline that lays out where your retirement income comes from year-by-year, explains Don Dirren, a financial advisor. You can write it out on graph paper, build an Excel spreadsheet, or use a specific software to help you visualize your retirement income plan. What’s most important, says Don, is that you have the plan in the first place.

Here are four easy steps you can take to create a comprehensive retirement income plan for yourself and (if applicable) your spouse.

Make Your Template First Advises Don Dirren

Your template should start with one row for every calendar year. List your (and your spouse’s, if applicable) age next to each year. You’ll want to extend your projection through both of your life expectancies.

It’s best to be overly optimistic here, explains Don Dirren. Better to plan for your care well past when you’ll need it than run out of money because you lived longer than expected! The average lifespan in America is 78.5 years, but that’s an average of millions of people – you may easily live into your 90s with luck and good medical care.

After you’ve made rows (horizontal) for each year of retirement, add columns (vertical) for each income item. We’ve laid out a list in the next section to help you determine what income items to add to your plan.

List Your Fixed Sources of Retirement Income

The next step is to list your fixed sources of retirement income, says Don Dirren. Don’t include one-time or uncertain sources of income like expected inheritance, just in case they don’t pan out. That way you can be certain of living within your means and use any unexpected windfalls as a bonus or fun money!

Sources you may want to add to your list include:

• Your (and Your Spouse’s) Social Security
• Your (and your Spouse’s) Pension(s)
• Annuity Income
• Earnings
• Other Income (i.e. Rental Income, Alimony, etc.)
• One-Time Income Sources (Insurance Payouts, Net Proceeds from Sale of Property, etc.)

Don Dirren advises that you do not include sources like capital gains, interest, or dividends as those are variable. Your plan is meant to help you calculate how much you will need to withdraw from your financial accounts to source your lifestyle.

List Your Expenses

Now you will add all of your annual expenses – including taxes! If you have a mortgage or other large debt that will be paid off within a few years of retirement, list that in a separate column so you can account for its dropping off once it’s paid.

Your tax rates will depend completely on your individual circumstances. Calculate your total income and deductions with the help of a financial advisor or tax planner, suggests Don Dirren.

Calculate the Gap Between Expenses and Income

Once you’ve listed all of your income and subtracted all of your expenses, you’ll be left with a number, says Don Dirren.

If that number is negative, you’ll have to be able to withdraw that amount from savings and investments to pay for your expenses. Usually, this means it’s time to find new sources of income or decrease your expenses.

If that number is positive, you should decide how you will invest or save that money to create a bigger financial buffer for yourself.