If you’ve spent time thinking about your retirement budget, you may have tried to crunch the numbers to estimate the rate of return you’ll need to earn on your savings to get you through retirement.

One listener of our radio program had done this activity and, based on his financial circumstances, estimated that a 4% rate of return would be adequate for his savings to last for 30 years. His question was whether this was a rate of return he could reasonably expect to earn on his money.

Before we analyze whether 4% is achievable, we want to make two quick notes. First, this 4% is the average rate of return over a period of time—it’s possible that over the course of his retirement, the caller may not have a single year in which he earns 4%. The second point is that, depending on how much you’ve saved and at what age you retire, the amount you’ll need to earn on your money in retirement may vary widely.

Now, whether you can reasonably expect to earn a specific rate of return depends on two primary factors: how well your investments perform and how efficiently you withdraw your savings during retirement.

Your Investments’ Performance

The fundamental answer to this question hinges on how well your investments perform over a given period of time. Intuitively, the lower the rate of return you’re seeking, the more likely it will be able to achieve, although it’s hard to guarantee with 100% certainty any positive rate of return.

That said, a rate of return of 4-5% is a reasonable goal when looking back at the historic returns the markets have given investors. If, however, you think you need to achieve a rate of return that’s closer to 7-8%, that will be more difficult to achieve.

The other factor to keep in mind is your time horizon, the period of time during which your investments will be invested. If you’re looking at your investments’ performance over a short period of time, say a couple of years for example, the markets are nearly impossible to predict, making it extremely difficult to guarantee a particular rate of return.

But if you’re looking at your investments’ performance over the length of your retirement—an event that may last for 25-30 years—you can be more confident that you’ll be able to meet a specified rate of return.

Your Withdrawal Strategy

It’s not just the raw investment performance that matters when it comes to your required rate of return—you also need to have a safe place that you can take your distribution from. If there’s a drop in the markets, we want to have other assets that we can tap for income in order to better prevent our clients from having to sell during a downswing.

Having to sell when markets drop is one of the quickest ways to derail your retirement income plan. That’s why we keep a portion of our clients’ assets in safer investments that are more insulated from a market correction so that we can use those safe assets for income during periods of volatility. Then, when markets recover, we’ll cash in some of the gains from the stock market and move those winnings into more conservative investments for future years’ income.

Investment performance gets a lot of attention when it comes to retirement income planning, but the planning surrounding your investments can be just as important, if not more so. That’s why a spending plan in retirement can help ease the burden on your portfolio and make that required rate of return an easier goal to achieve.