Five retirement secrets that you aren’t supposed to know about

It's a good idea to start honing in on your retirement vision as you get closer to retiring. The first step is deciding how you'll spend your time, how much money you'll need in retirement, and where that money will come from. 

But as you build your retirement plan, you may encounter a few unexpected challenges along the way. The sooner you confront them, the better you can prepare effectively and efficiently. Here are five surprising things you may not know about retirement.

1. Tax on Retirement Savings and Social Security Benefits

Once you start receiving Social Security checks, it may come as a surprise at tax time that the state wants some of that money back. As much as 85% of Social Security benefits are taxable, depending on your income. In 37 states, no taxes are charged on these benefits at all. But in these other 13 locations, state taxes are imposed on at least some retirees that end up reducing the number of benefits they get to keep. The 13 states affected are Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.

It should be noted that even if you reside in one of these 13 states, you may not owe taxes on your Social Security income, as it would rely on the local tax laws in effect at the time. So you can be ready for any payments you may owe, you need to find out precisely when and how taxes are applied to benefits.

Taxes are another crucial factor that you should constantly take into account. You'll have some flexibility in controlling and possibly lowering your annual tax burden in retirement by having taxable funds, tax-deferred accounts, and tax-free accounts.

Withdrawing funds from your IRA or 401(k) contributions that you made pre-tax is subject to both state and federal income tax obligations. The good news is that during your retirement, withdrawals from your post-tax 401(k) or Roth IRA are tax-free. 

Check out the tax breaks your state offers by using Kiplinger's Retiree Tax Map.

2. Medicare Does Not Cover All of Your Health Costs

When you hit age 65, it's time to enroll in Medicare. But just as with the health insurance you've had throughout your working years, you'll have to pay premiums for Medicare coverage and co-pays on covered services. And some services -- such as long-term care -- aren't covered at all.

The average 65-year-old couple will pay $315,000 in out-of-pocket costs for health care during retirement in 2022, according to Fidelity Investments. What comes as surprising is that these health care costs do not cover potential long-term health costs. 

Instead, opting for a supplemental insurance plan can help you to cover all these expensive health costs easily. Also consider buying a long-term-care insurance policy, which can cover your home health aides, nursing home, and assisted-living facilities. This is one of the crucial factors when you retire. Health costs can drain all your savings and can make your retirement successful or stressful.

3. Senior Discounts Aren't Always a Good Deal

When you have earned the right to a senior discount, you know you have reached your golden years. Typically, these discounts are only available to those who are 60 or older, though some of them (like the AARP member discounts) might be accessible as early as age 50.

However, you need to be aware of these senior discounts since sometimes these discounts do not offer good deals. For example, when you book a journey and stay in a hotel, make sure to check the senior rate.  Then double-check with a discount travel Website, such as Trivago.com, to see if you can score a better deal on the price. Also determine whether other discounts, such as an AARP or AAA member discount, might beat the hotel's own senior rate.

4. You Must Withdraw From Your nest egg

If you consider working even after your retirement, you can avail of various tax benefits. Make sure to check that your new employer is offering you a 401(k), and start contributing to that account.

You cannot contribute to a traditional IRA once you hit the age of 72 years old. For self-employers, you can create a solo 401(k). Do consider these retirement tips vital since all your retirement tips depend on how you plan your income and savings.

But just because you have to take money out of the tax shelter doesn't mean you have to spend it. If you don't need the money to live on, you can instead reinvest the money in a taxable account.

5. Stretch your retirement income for the next decades

Workers saving for retirement are often focused on their retirement date. But that's just the start of potentially decades in which your retirement savings will have to support your income. You'll need 30 years of yearly income if you retire at 65 and live to reach 95, which might be almost as long as your working career.

There are several strategies to guard against "longevity risk"—the possibility of living longer than your money lasts—when developing your retirement income plan. Stocks can offer long-term gain and help shield you from the risk that inflation will consume your savings, so maintain them in your nest egg if you can.

Another smart option would be to maximize the equity in your home. This is where a reverse mortgage will come in handy.

You may not have put enough money into a retirement account, but you have put a lot of effort into paying off your mortgage and purchasing a property. You can use the equity you've built up in your home as a covert source of retirement funds. Your house may be your most valuable retirement asset, and there are ways you can use that money to help pay for retirement.

If you have limited retirement savings, want to stay in your home and need to improve your cash flow, a reverse mortgage is the secret you need to know about. Half of the average retiree's net worth is in their home, but hardly anyone uses it.

A reverse mortgage is a federally-insured loan that allows homeowners age 62 and older to retain home ownership, but also eliminate ongoing mortgage payments and — in many cases — use some of their home equity to help make ends meet.  A reverse mortgage is a loan.  You are borrowing against your home equity.  Contrary to traditional mortgages, a reverse mortgage does not need repayment as long as the borrower continues to reside in the property.

Just recently, KK Financial Solutions conducted a FREE webinar where you will discover the truth about REVERSE MORTGAGE and everything you need to know. Along with Rebecca Porter, Reverse Mortgage Specialist of TILA Mortgage, we offered some helpful perspective on the current state of the market and learn how to tell if it’s the right time to use a reverse mortgage.

Below you can find a replay recording of our webinar "Reverse Mortgage: Bridging the income gap during turbulent time"

In this webinar, we identified what is fact and what is fiction about a reverse mortgage, so you can better determine when to use a reverse mortgage in retirement planning.

Other topics that were discussed:

• Recognize what a reverse mortgage can be used for
• Identify when you should and should not take out a reverse mortgage
• Identify the costs associated with a reverse mortgage
• Identify how much money you can take from a reverse mortgage learn about reverse mortgages, which allow seniors to borrow against equity with a low risk of default.