How the “Big Beautiful Bill” Could Impact Your Retirement: What Retirees Need to Know

If you’re nearing retirement or already retired, changes in federal tax law can feel overwhelming, especially when they affect your retirement income, taxes, Social Security benefits, or Medicare premiums. Proposed legislation like the “Big Beautiful Bill” has drawn attention for its potential impact on retirement tax planning and tax-efficient retirement income strategies.

While many retirees may not follow legislative proposals closely, understanding how these changes could affect your financial plan is essential. This article explains what the Big Beautiful Bill proposes and why retirees should review their retirement income plan with a trusted financial advisor.

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What Is the “Big Beautiful Bill”?

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The “Big Beautiful Bill”, officially the One Big Beautiful Bill Act (OBBBA), was passed by Congress and signed into law on July 4, 2025. The bill includes the following:

1. Additional Senior Tax Deductions for ages 65 and older
2. Adjustments to Standard Deductions
3. Retains the same number of income brackets
4. Changes to itemized deductions

Potential Benefits for Retirees

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Several provisions in the proposal may offer advantages for retirees and pre-retirees focused on minimizing taxes in retirement:

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1. Additional Senior Tax Deductions for ages 65 and older

Key considerations:

• Grants seniors over 65, with a Modified Adjusted Gross Income (MAGI), an additional $6,000 deduction
• Each spouse can take the deduction for a total of $12,000
• The deduction applies in addition to itemization or standard deduction
• Income phase-outs apply at higher income levels
• Currently only applies to the 2025 - 2028 tax years

For retirees who qualify, this deduction may reduce taxable income and improve after-tax cash flow.

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2. Adjustments to Standard deductions

The standard deduction is permanently increased to $15,750 for individuals and $31,500 for married couples filing jointly. These amounts will be adjusted annually for inflation and have the potential for additional tax savings for taxpayers who don’t itemize.

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3. Retains the same number of income brackets  

The OBBBA did not add or remove any income tax brackets and they will remain unchanged compared to 2024. This prevents tax rates from returning to the higher pre-2017 levels. Strategic planning across brackets may help manage taxable income timing during the 2025 - 2028 tax years.

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4. Changes to Itemized Deductions

Key Considerations:

• Some itemized deductions have been expanded, reinstated, capped, or eliminated entirely.
• Higher Deductions for State and Local Taxes (SALT), including property taxes; increases SALT deduction limit to $40,000 and phases out taxpayers earning over $500,000.
• Pass-Through Income Deduction makes the qualified business income deduction that was part of the 2017 Tax Cuts and Jobs Act permanent.

Other Additional Changes

• Deduction on tips and worker overtime
• No tax on auto loan interest
• Permanent extension of the higher individual AMT exemption established in 2017
• Trump Account: Tax-Advantage savings for kids
• Charitable deduction for non-itemizers
• Continuation of higher estate tax exemptions from 2017

Potential Challenges to Consider

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While the proposal includes positive tax provisions, retirees need to know how to properly take advantage of the next few years. Establishing a relationship with a trusted advisor can help you coordinate with your tax professional and estate planners to have a robust plan in place for your retirement.

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Why This Matters for Your Retirement Income Plan

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Legislative changes can directly affect:

• Taxes on retirement accounts and taxable brokerage accounts
• Roth IRA conversion strategies
• Social Security tax planning
• Medicare IRMAA thresholds
• Long-term investment and withdrawal decisions

A well-designed, tax-efficient retirement income strategy helps retirees adapt to policy changes while protecting income and long-term financial stability.

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How Legacy Wealth Management Helps Retirees Navigate Change

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At Legacy Wealth Management located in Manassas, Virginia, we specialize in helping retirees and pre-retirees coordinate:

• Retirement income planning
• Tax-efficient investment strategies
• Roth IRA conversions
• Social Security tax planning
• Medicare IRMAA and healthcare cost planning
• Portfolio management for retirees

As fiduciary financial advisors, we monitor legislative developments and help clients understand how potential changes, like the Big Beautiful Bill, may affect their personal retirement strategy.

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Next Steps

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If you want to understand how potential tax and retirement law changes could impact your retirement income and tax strategy, we invite you to schedule a complimentary consultation with one of our advisors by visiting www.lwealthmanagement.com/contact or call (877) 650-4738. Legacy Wealth Management helps retirees build resilient, tax-efficient retirement income plans, even as laws and policies evolve.