Planning to Retire This Year? 12 Checklist Items

Retirement is on your calendar for 2022. Congratulations! You're about to reach one of life's major financial milestones.

Ideally, you'll transition smoothly out of the workforce and set the tone for a relaxed, carefree retirement. You'll want to get organized early to make that happen. Here's a retirement checklist of 12 items to address as you move toward your last day at the office.

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Schedule a time to talk with your benefits administrator about the details of your retirement benefits. A high-priority topic to discuss is how to take distributions from your 401(k). You need to know how to schedule distributions and if there are any limitations on withdrawals. As an example, your plan might allow for scheduled, periodic distributions but not one-off withdrawals.

You should also verify the timing of bonus pay and how any pension benefits are calculated. Those details can help you pick a retirement date that maximizes your income this year and going forward.

Also ask about your healthcare options. Some employers do provide healthcare benefits to retirees. If yours doesn't, you can discuss the process for transitioning from your workplace plan to Medicare.

ALSO READ: Guide to Taking Money Out of Your 401(k)

A good budget tells you what you can spend and how much income you need. You may have estimated your retirement living expenses already, but now's the time to get granular with the numbers.

List out your monthly, quarterly, and annual living expenses. Remember to include a line item for leisure activities. Also adjust for changes to your health insurance. Then review the numbers as objectively as you can. You might even share your budget with a relative to get a second opinion.

Once you're comfortable with the numbers, compare your expenses to your estimated income from savings, pensions, and Social Security. It's not ideal if your numbers don't balance -- but it's better to know now versus later. Start brainstorming ways to trim expenses or boost your income.

Your home may be the solution to a tight retirement budget -- particularly if you have a lot of home equity. There are many options here. You could explore the possibility of downsizing, paying off your mortgage, doing a reverse mortgage, or refinancing.

In a perfect world, you'd sell your home for enough to repay the mortgage and buy a smaller home with cash -- eliminating those principal and interest payments entirely. That strategy requires a lot of home equity, however.

If you want to stay in your home, you could also generate cash with a reverse mortgage. Reverse mortgages have no monthly repayments. Instead, the bank takes ownership of your home once you're gone.

If you don't have enough home equity for those strategies, you might look at refinancing to lower your payment.

ALSO READ: How to Use Your Home As Retirement Income Without Taking Out a Reverse Mortgage

Your investment needs prior to retirement are different than your investment needs in retirement. As you approach life after work, it's wise to shift a chunk of your portfolio into income-producing securities. Bonds are popular for this, but premium dividend stocks may have a role for you, too.

A common guideline is to have 40% to 50% of your portfolio allocated to bonds, with the remainder in stocks. You can adjust this based on your goals and risk tolerance. For example, if you want to maximize growth and you are comfortable with risk, you might hold 35% bonds and 65% stocks. Or, if you want to be conservative, a mix of 55% bonds and 45% stocks may suit you better.

If you haven't projected your Social Security income yet, do so now. You can easily view projected benefits based on different claiming ages at the website my Social Security.

When you log into the site, you'll see that your benefit is lower if you claim earlier. Those reductions hinge on your full retirement age (FRA), or the age you qualify for your full benefit. Claim earlier than FRA and your benefit is reduced. Claim later than FRA and your benefit is increased.

You can use those rules to suit your needs. If you want a little more from your Social Security benefit, delay your retirement for a few months. Or, if you'd rather retire earlier, plug the smaller benefit into your budget. If your budget still balances, you can feel comfortable moving up your retirement date.

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Make a list of your retirement accounts, annuities, and life insurance policies. Keep that list in a safe place. You might want to share it with your beneficiaries, too.

Also, if you have more than a few retirement accounts, consider combining them. With fewer accounts, you'll have fewer decisions to make about where to pull money for your living expenses. You can combine traditional 401(k)s and traditional IRAs. Same goes for Roth 401(k)s and Roth IRAs.

You'll want to combine any accounts by way of direct rollovers. In a direct rollover, no money touches your hands. The account administrators handle the transfer behind the scenes. This is the easiest way to avoid incurring taxes accidentally when consolidating your accounts.

ALSO READ: How to Roll Over Your 401(k) to an IRA (and Why You Should)

Your withdrawal strategy defines how much money you'll pull out of each retirement account and how often. If you have funds spread across pre-tax and after-tax accounts, the right withdrawal strategy can lower your income taxes in retirement.

Here's what to know: Withdrawals from pre-tax accounts -- traditional 401(k)s and traditional IRAs -- are taxable. These accounts are also subject to taxable required minimum distributions (RMDs) once you are 72.

On the other hand, qualified retirement withdrawals from after-tax Roth accounts are tax-free. Roth IRAs also do not have RMDs.

For most retirees, it makes sense to pull money from pre-tax accounts first and delay withdrawals from your Roth IRA balances. This way, you work down the balances that will later be subject to RMDs. That can lower your RMDs, and your tax bill, later.

Medicare is not a one-size-fits-all program. There are multiple layers of coverage and different ways to obtain those coverages. Original Medicare, for example, includes hospital and medical insurance. You can optionally add prescription drug coverage or Medigap, which helps pay for your out-of-pocket costs.

You could alternatively choose a Medicare Advantage plan in lieu of original Medicare. Medicare Advantage plans bundle coverage for hospital stays, medical visits and supplies, and prescription drugs.

Original Medicare and Medicare Advantage plans can vary widely on coverages, premiums, and out-of-pocket costs like co-payments. Give yourself plenty of time to compare your options. You might start by listing the medical services you use most often. That will help you evaluate different plans and identify the options that are suitable.

Boredom is a real problem for new retirees. Once the excitement of not working wears off, you might struggle to fill your time.

Head off the boredom trap by trying new hobbies before you leave the workforce. Try your hand at gardening, arts or crafts projects, exercise, or sports like tennis or pickleball. You might also experiment with online coursework or writing your memoirs. Travel is a great diversion, too, assuming you have the budget for it.

If none of those activities stick, think about where you might like to volunteer or work part-time.

ALSO READ: 6 Ways to Avoid Getting Bored in Retirement

Yes, it's likely you'll owe income taxes in retirement. 401(k) distributions, traditional IRA distributions, and pensions are taxable. A percentage of your Social Security benefit is also taxable unless it's your sole source of income. And if you have any investments in taxable accounts, you'll incur taxes on realized capital gains, interest, and dividends.

You can choose to have taxes withheld from most sources of retirement income, including Social Security. If you opt for no withholding, be sure to budget for quarterly tax payments. Otherwise, you might incur a penalty for underwithholding.

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An ample cash savings balance can head off all kinds of financial problems in retirement. There are the usual disasters like car accidents and busted plumbing. There's also the possibility you'll underestimate something in your retirement budget -- like your healthcare costs. Extra cash gets you through those situations without credit card debt.

If you can, pad your cash savings until the balance is enough to cover 12 months of your living expenses. That gives you tons of flexibility to sort out your budget and absorb financial emergencies, too.

According to life insurance company Genworth, long-term care services range from about $1,600 monthly up to $8,821.

A 2019 study sponsored by the U.S. Department of Health and Human Services found that 48% of adults who reach age 65 receive some form of paid long-term care in their lifetime. In most cases, the stint of paid care is short. But 24% of older adults require more than two years of paid long-term care.

Even if you're healthy today, it's smart to have a plan for long-term care -- just in case. Options include self-insuring with your own savings, buying long-term care insurance, buying life insurance with a long-term care rider, or taking cash loans from your life insurance. Weigh these options and choose a strategy that makes sense.

ALSO READ: The Shocking Cost of Long-Term Care -- and How to Tackle It

Start your 2022 retirement off right by averting as many unpleasant financial surprises as possible. You can do that by getting up to date on the details of your living expenses and income sources, including home equity and Social Security.

Expenses that commonly trip up retirees are healthcare and taxes. And income complications can arise from 401(k) withdrawal restrictions, too much risk in your retirement portfolio, or too many retirement accounts.

There's value to sorting out your income and expense details now, before you retire. You can make a clean, confident break from your paycheck and jump right into your newfound hobbies. That's the right way to transition into this next phase of life.

Catherine Brock has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.