Retirement should be one of the best times in your life, but it can quickly turn into the worst time if you retire before you're financially ready. To make sure you don't end up spending the last years of your life struggling to afford the basics with too little cash, make sure you complete each of these five tasks before you leave the working world.

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1. Decide on a retirement budget

It's imperative to have some idea of how much you're going to spend during retirement. Many people simply assume they'll spend about 70% to 80% of what they spend preretirement, but this isn't always the case. If you're thinking of turning in your notice and leaving work for good, you should sit down and set up a budget first. Take into account all the things you'll spend on, including trips, housing, transportation, hobbies, and medical care.

Compiling a pretty detailed budget is the first step in figuring out how much retirement income you need. Leave yourself a little wiggle room in that budget for unexpected expenses, too, and make sure you're being realistic. Don't assume your transportation or clothing costs will be nothing now that you're not working, as you still need to go places and have things to wear.

2. Figure out how much money you'll have coming in

While knowing your retirement budget is the first step in deciding if you're ready to retire, the second step is making sure you have enough income to cover all of the costs you'll incur. There are a few primary sources of retirement income, including:

  • Social Security
  • Investment accounts (401(k), IRA, and other retirement accounts)
  • Pension income if your employer provides a pension

You may also have income from other sources, such as rental real estate, alimony, or money in other brokerage accounts not specifically earmarked for retirement. The important thing is to determine how much money you'll have from all different sources.

You can find out your estimated Social Security benefits by visiting the Social Security website. Keep in mind that your age at the time of retirement will affect your benefits. If you retire before your full retirement age, or FRA, you'll see a reduction in benefits that lasts throughout retirement. If you wait until after FRA, you'll raise your benefit by earning delayed retirement credits until age 70.

Figuring out how much income your pension will provide is easy-- you can ask HR or your pension administrator what you'll receive based on when you retire.

It's a bit more complicated to calculate the amount of income your investments will produce. One way to do this is by following the 4% rule, which says you can withdraw 4% of invested funds in the first year and then increase that amount by inflation annually. For example, if you have $1 million saved, 4% would be $40,000. Some experts believe the 4% rule is outdated, though, so you may want to consider other methods, such as using required minimum distribution (RMD) tables from the IRS to decide how much you can withdraw.

Add the income from all of these different sources together to see how much you'll have coming into your household. Then compare this to your budget. If you have more expenses than your income can cover, you'll need to consider lifestyle changes or keep working and saving for longer.

3. Pay off most or all of your debt

Going into retirement with a lot of debt is a recipe for disaster. When you're on a fixed income, the last thing you want to do is send a big chunk of change to creditors each month to cover interest costs.

While many seniors do retire with a mortgage, try to pay yours off to keep housing costs down so you'll have more money available for other things. If you can't get your mortgage paid, at the very least, make sure you aren't going into retirement with high-interest debts such as credit cards or payday loans. Paying the interest that comes with these types of debts could quickly deplete your retirement nest egg. And if you can't afford to pay off the debt quickly in retirement and you make only minimum payments, you could be indebted for the rest of your life.

4. Make a plan for healthcare

Are you assuming Medicare is going to cover all your healthcare needs during your retirement years? If so, this faulty assumption could lead to big financial trouble. When experts estimate expected healthcare spending in retirement, the figure typically starts at $280,000 and goes up from there. You absolutely must have money set aside to cover care costs, as big bills are almost inevitable as you age.

Ideally, you'll have a lot of money in a health savings account (HSA) so you can withdraw funds to cover healthcare tax free. But if you don't have an HSA, you'll need to make sure your 401(k) or other investment accounts are big enough to fund your care needs or that you have a lot of other savings to pay for medical expenditures. If you don't have dedicated money earmarked for healthcare, consider working a little longer and saving for this purpose.

5. Decide how you'll fill your time

Retirement can lead to depression and other health problems if you don't have a plan to fill your days. Decide what you'll do during your senior years -- in consultation with your spouse -- so you can make sure this is a good time in your life.

Take these steps to prepare for your golden years

Now you know some of the key steps you need to take to be prepared for retirement. Start working through the checklist to make sure you can leave the workforce when you're ready -- and not before.