What does an average retirement cost? According to the Bureau of Labor Statistics: about $49,000 per year in 2014, the most recent year for which statistics are available. That means if you live for 20 years after you retire, you’ll end up spending about $980,000 (plus taxes, not accounting for inflation).

If you’re trying to figure out how much you need to save for retirement, then $1 million might sound like a nice round number to aim for when it comes to saving. But the reality is that figuring out how much your retirement will cost is a little more complicated. Here are some key questions to ask.

HOW MUCH WILL YOU NEED EACH YEAR?

Remember that $49,000 per year is the average. The reality will be very different for every one of us. Do you plan to stay close to home and spend your days babysitting your grandkids? Then you may not spend as much. Do you plan to take a major trip or two every year and get in plenty of golf and fine dinners out? You’re probably going to spend more. When you’re young, it’s hard to know exactly what you’ll spend in retirement. But as you get a sense of your lifestyle, you can assume retirement will be somewhat similar. Do you spend $30,000 a year or $200,000? Take your personal numbers into account when trying to estimate your retirement costs.

HOW LONG WILL YOU LIVE?

A yearly cost estimate is helpful, but only if you know over how many years you’ll be spreading that cost. According to the Social Security Administration, the average life expectancy of a 65-year-old man today is 84. For women, it’s 86½. But those are just the averages. There’s a one in three chance a 65-year-old will live to 90; one in seven will live past 95. An average retirement will last about 20 years, but what if you live longer? If you want to ensure you won’t run out of money, you’ll likely need to save for at least a 30-year retirement.

HOW WILL INFLATION AND TAXES IMPACT THE COST OF YOUR RETIREMENT?

Costs go up. The things you can buy today with $49,000 are likely to cost a lot more in the future. That means if you’re 30 and planning for the cost of an average retirement now, you shouldn’t stick to that $49,000 annual estimate — by the time you retire, the average cost will likely be significantly higher. Inflation will also affect you during your retirement. That’s because over the 20 to 30 years or more that your retirement could last, costs are likely to increase.

In addition to inflation, taxes can be another big cost in retirement. If you’re planning to fund the $49,000 average with Social Security and money from a 401(k), you’re going to need a lot more than $49,000 in income each year. That’s because you’ll owe tax on the money you withdraw.

HOW WILL YOU CREATE INCOME IN RETIREMENT?

When you’re saving for retirement, it can be easy to focus on, well, saving (perhaps you’re shooting for the $1 million number). But when it comes to funding your retirement, saving is only half the equation. You also need a plan for how you’ll generate your income. And that plan can affect how you save.

The best retirement plans include income from myriad sources, including Social Security, pensions, annuities, IRAs, 401(k)s and even cash value from life insurance. It’s also best to have a mix of taxable and non-taxable income sources like traditional and Roth retirement accounts. The mixture of income sources can allow you to be more tax efficient both when you’re saving and withdrawing your savings. It can also help you balance the growth you could get from riskier investments (which help you keep up with inflation) with the stability you can get from guaranteed income sources like Social Security, pensions and annuities (which help account for the possibility of living longer than you expect).

Ultimately, when you’re deliberate about how you generate income in retirement, you can get more out of the money you have saved. That means more in retirement at a smaller cost!

If all this seems a little overwhelming, don’t worry. A financial advisor can help you get a sense of where you are and what you want for the future. Then he or she can help you build a plan that takes all the factors we covered into account. And remember, your plan isn’t just about retirement — it’s also about preparing financially for all the things you want to do between now and then.

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