After decades of saving and investing, the big pivot to relying on your portfolio to generate income is the central financial challenge of retirement. “The big question on everyone’s mind is how do I create that paycheck,” says Robert Gilliland, managing director and senior wealth advisor at Concenture Wealth Management in Houston. “When we ask our clients about the things that concern them about retirement, numbers one and two are health care and an income stream.”

When you turn to living off of your investments, it’s natural to focus on dividends and interest — the actual income your stocks and bonds produce. You may even hope to leave your principle alone, perhaps out of a reluctance to flip from saving to spending. In a survey by the Employee Benefit Research Institute, nearly 6 in 10 retirees reported no plans to spend down a significant portion of their assets, with the potential for an unforeseen expense late in life given as the chief reason for their reluctance.

But hoping to rely solely on stock and bond payouts could leave you short, especially if you’re aiming for the often-suggested annual withdrawal rate of 4%, or even the more conservative 3% rate. While stock dividend yields are up slightly this year, the average for the S&P 500 () is still well below 2%. Yields on 10-year Treasury bonds — which were as high as 4% in 2010 — have been stuck between 1.5% and 3% for much of the past decade. Reaching for higher yields can lead you to take unnecessary risks.

To create the retirement income you need, you may have to adopt a more holistic approach, one that involves selling stocks and bonds as well as collecting their payouts. But that’s especially challenging to do in the midst of a market downturn. When you tap your retirement savings to cover living expenses when the market is down 20%, you are literally locking in your losses. Instead, you’ll want a strategy that’ll carry you through good and bad markets.

1. Know how much you need

Creating an income stream starts with an honest budget review, says financial advisor Nick Foulks, director of communications strategy and client engagement at Great Waters Financial in Minneapolis, Minnesota. “Many people are nervous about whether they’re going to be able to sustain their standard of living in retirement,” he says. “We have an idea of what we think we spend every month, but honesty with your budget is critical — it will help you create an appropriate income stream.” Doing this exercise helps you determine how much income your portfolio must generate. More importantly, by distinguishing between your fixed costs and your discretionary spending, you’ll have more flexibility to adjust portfolio withdrawals as needed.

2. Set up a system for selling stocks

When the market is rising, selling stocks for income comes naturally. As you rebalance your portfolio on a regular basis, you’ll sell winners to get your allocation back to your targets. When stock prices are falling, the last thing you want to do is lock in a loss by cashing out to cover current living expenses. To avoid having to sell during a bear market, financial advisors recommend spreading your retirement savings into three buckets, or time-segmented portfolios. “Think about it as money for now, money for later and money for even later,” says Foulks.

The first bucket covers your income needs for the next five years. “In that bucket, we don’t count on any sort of growth,” says Gilliland. Instead, invest those funds in conservative asset classes like cash and short-term bonds. That second bucket, similar in size to the first one, covers your withdrawals for years five through 10 and can be invested less conservatively. The rest of that portfolio, for 10 years and beyond, can be invested for growth. You’ll have to replenish bucket No. 1 as you draw down that money, but that can happen in a more systematic way over time.

3. Keep taxes front and center

When you’re calculating how much income you can draw from your portfolio, don’t overlook the varying tax treatments. Your traditional IRAs, 401(k)s and other workplace retirement accounts grew tax-deferred, but your withdrawals are taxed as ordinary income, and those rates run as high as 37%. Plus, state and local taxes may apply. “For those accounts, if you need $5,000 a month, you need to withdraw $5,000 a month plus whatever your marginal income tax bracket is,” says Foulks. Roth IRA withdrawals, on the other hand, are tax-free in retirement.

With qualified dividends and long-term capital gains, however, your taxes can be much lower. Those rates top out at 20% — yet another reason that selling appreciated stocks should be a cornerstone of your income plan. Plus, if you do have to cash out of a losing position, you can use that capital loss to offset your gains and even a limited amount of ordinary income.

4. Make your bond income more predictable

Bonds belong as part of your retirement income strategy, but for truly predictable income, actual bonds have the edge over bond mutual funds and bond exchange-traded funds (ETFs). “If you have a classic bond that has a coupon rate and a maturity date, versus a bond fund or a bond ETF, that’s a totally different thing because your bond is going to be paying you a residual income, regardless of how the bond is valued,” says Foulks.

Gilliland suggests holding individual bonds in the form of a 10-year bond ladder — that is, a series of bonds that mature in each of those 10 years. “This way you know exactly what you own,” he says. “You also know exactly what it’s going to pay, and you know exactly when it’s going to come due.” Bond mutual funds, which are designed to go into perpetuity, can be more volatile, he notes, making income planning harder.

5. Lock in guaranteed income

Creating a base of predictable income — ideally enough to cover basic living expenses — can help balance out the risks of owning stocks and drawing down your portfolio in retirement. A pension can serve that role, but a diminishing number of retirees can count on having one. You could replicate that guaranteed income by investing a portion of your retirement savings in a fixed annuity. Just keep in mind that advisors or insurance agents sometimes push complicated annuities due to large commissions rather than to benefit the client, says Gilliland. “You have to make sure that you understand exactly what you’re investing in, exactly what the terms are and the cost of those annuities.”

Your other source of guaranteed income is Social Security, and in this case your goal should be to lock in as large a benefit as you can. That means waiting as long as possible to claim. You can claim as early as age 62 and as late as 70, and for every year you delay, your benefit increases by about 8%. “The reality is that if you start taking Social Security too early, that can be extremely expensive to you,” says Gilliland. “A lot of people say, I just don’t want to touch my investment accounts, but I want to be done at 62,” he says. “They turn on their Social Security, and they’ve only given themselves 75% of what they were entitled to.”