3. Social Security taxes

Most people realize they are paying a tax into the Social Security system during their working years, but did you know that you may also have to pay tax on your benefits once you start receiving them? Up to 85% of Social Security benefits are taxable, and the income thresholds that trigger Social Security income taxation are low -- $32,000 for a married couple, for example.

"Retirees have a difficult time adjusting to the taxability of Social Security income and the low income thresholds. Most retirees don't see Social Security as taxable deferred income, since they paid into the government fund using after-taxed dollars during their employment years. In their minds, retirement income shouldn't be taxed twice," says Braxton.

You'll also forfeit some benefits if you continue to work before you hit full retirement age (in 2012, you give up $1 in benefits for every $2 you make over the earnings limit of $14,640). The good news is that when you reach full retirement age, your benefit will be adjusted upward to account for the forfeited benefits.

4. Taxes on nest-egg withdrawals

Uncle Sam wants not only a piece of your Social Security benefits, but also his slice of your pretax retirement savings. You stashed away pretax savings in a traditional IRA or 401k, but when withdrawn from such accounts, those dollars have a tax bill attached to them, says certified financial planner Burt Hutchinson, of Fisher & Hutchinson Wealth Advisors, which has offices in Wilmington and Lewes, Del. Money you take from tax-deferred retirement accounts is taxed at your top ordinary-income tax rate, which can be as high as 35% currently. So if you need $30,000 to buy a new car and you are in the 25% tax bracket, you'll need to withdraw $40,000 from your IRA to cover the cost of the car and the $10,000 tax bill on the withdrawal.

You can leave the money in tax-deferred retirement accounts until you hit 70½ years old. Starting at that age, seniors are required to take minimum withdrawals from IRAs and 401k's. If you have a large amount of money in those types of accounts, a sizable required minimum distribution may push you into a higher tax bracket than you budgeted for. To mitigate the tax hit, consider tapping those accounts sooner. Another smart strategy: Start stashing money in a Roth IRA, which has no required minimum distribution and can be tapped tax-free.

5. Loss of income when one spouse dies

A critical component of estate planning for couples is ensuring that a surviving spouse will have enough money to live on. "One thing people don't plan for is the reduction of income if a spouse or partner dies -- without corresponding reduction in expenses," says certified financial planner Kathy Hankard, of Fiscal Fitness in Verona, Wis. For example, if both spouses are receiving Social Security benefits, a significant chunk of that income stream will disappear.

The surviving spouse can switch to a survivor benefit if that is higher than her own, but the survivor benefit will not make up for the income drop from two benefits to one. This is among the reasons why boosting the potential survivor benefit through delayed retirement credits is a smart strategy for couples. The higher-earning spouse can wait to take his benefit, which can earn up to 8% a year in delayed credits up to age 70. Then, at that spouse's death, the survivor can switch to a benefit worth 100% of the deceased spouse's benefit, including the delayed credits plus cost-of-living adjustments.

The same income reduction can happen if a spouse who receives a pension hasn't signed up for a joint-and-survivor annuity. If the annuity is based only on the pensioner's life expectancy, at his death, that income source will dry up, with no payments for the surviving spouse. Choosing the joint-and-survivor option may result in less money monthly, but it will provide income for the surviving spouse if the pensioner dies first.

Hankard says one client's income dropped about 35% as a result of lost Social Security income and a drop in pension income from his spouse's death, while expenses decreased only about 10%. A big change in cash flow thus may require a change in lifestyle. Plan ahead to ensure that your spouse will have enough money to maintain his or her standard of living.

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