Congress calls it the One Big Beautiful Bill. And depending on your situation, it might be — or it might not.
The sweeping legislation changes key parts of the tax code, affecting everything from income brackets and deductions to retirement account rules and estate planning thresholds. For retirees and near-retirees, current strategies may no longer deliver the same tax savings or income stability.
The One Big Beautiful Bill introduces both opportunities and challenges. This article breaks down what’s changing and how you might have to adjust your retirement plan in response.
What Is the One Big Beautiful Bill (OBBB)?
The One Big Beautiful Bill Act (OBBB) is an extensive piece of legislation that’s intended to simplify parts of the federal tax code and modernize retirement and estate planning rules.
While much of the bill focuses on tax administration and income reporting, several provisions directly influence how retirees, investors, and business owners manage their money. It revises tax brackets and phase-out thresholds, updates deduction caps, and adjusts how certain types of income — including Social Security benefits and investment earnings — flow through to your adjusted gross income (AGI).
For retirees, these changes impact how and when it makes sense to realize income, claim deductions, or execute Roth conversions. And for higher earners, OBBB’s changes to AGI phase-outs and deduction limits may require more nuanced tax planning — especially if you live in a high-tax state like Minnesota.
While the legislation’s nickname might sound optimistic, the reality is more complicated. Understanding how these adjustments interact with your existing financial plan is the first step to making the most of the new rules.
Higher Standard Deductions and Adjusted Itemized Rules
Starting this year, the OBBB increases the standard deduction to $15,750 for single filers and $31,500 for married couples filing jointly — up from $15,000 and $30,000, respectively.
Meanwhile, the bill temporarily raises the state and local tax (SALT) deduction cap from $10,000 to $40,000 through 2029, with a phase-out for high earners once modified adjusted gross income (MAGI) exceeds $500,000. After 2029, the cap is scheduled to revert to $10,000 unless Congress extends the provision.
The act also makes broader adjustments to itemized deductions, including tweaks to medical expense thresholds and charitable contribution limits.
These changes should mean fewer people will itemize. The higher standard deduction will cover the majority of taxpayers, simplifying returns but also limiting the benefit of deductions for medical expenses, mortgage interest, or charitable giving.
The expanded SALT cap is a modest win for those in high-tax states like Minnesota and New York, where property and income taxes frequently exceed the old $10,000 limit. While this helps offset state tax burdens, the benefit fades quickly for higher-income households subject to the phase-out.
Retirement Planning Impact
Reevaluate whether itemizing still makes sense: If your itemized deductions no longer exceed the higher standard deduction, consider “bunching” charitable gifts or medical expenses into a single year to maximize their impact.
Leverage donor-advised funds: For charitably inclined retirees, consolidating several years of giving into one large contribution can restore the tax benefit of itemizing.
Model your 2025 return early: With the new deduction levels and expanded SALT cap, an early projection with your CPA or financial advisor can clarify whether to itemize or take the standard deduction.
A New Deduction for Seniors Can Offset Social Security Taxes
The OBBB didn’t address Social Security taxes directly, but starting in tax year 2025, there’s a new additional deduction for taxpayers aged 65 and older. Eligible filers can claim an extra $6,000 per person ($12,000 for a married couple if both spouses qualify). This opens a path for many retirees to pay less tax, or even no tax at all, on their benefits.
The new “senior bonus deduction” applies through 2028 and begins to phase out once modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers — at a rate of 6% for every dollar earned over the income threshold.
To give you an example, let’s assume a married couple has $170,000 of modified adjusted gross income, which is $20,000 above the $150,000 phase-out threshold. Their senior deduction would be reduced by $1,200 (6% x $20,000) to $10,800.
For retirees who already benefit from the higher standard deduction, this new provision delivers another layer of relief. This added cushion may offset some of the bite from taxable Social Security benefits or required IRA withdrawals, particularly for retirees on fixed incomes.
Retirement Planning Impact
Mind the phase-outs: Taxable income from Roth conversions, capital gains, or RMDs could easily push MAGI past $150,000 for joint filers, reducing the deduction. If your income hovers near that range, consider spreading conversions or withdrawals across multiple years.
Coordinate with charitable giving: Using Qualified Charitable Distributions (QCDs) to lower AGI can help keep income below the threshold — letting you preserve this deduction and reduce taxable distributions.
Expanded Education Funding
The One Big Beautiful Bill broadens how Americans can save and pay for education, from early childhood through continuing education.
Trump accounts
A new savings vehicle, Trump Accounts encourage long-term saving for children born between 2025 and 2028.
- These accounts receive a $1,000 federal seed deposit and allow up to $5,000 in annual contributions.
- Withdrawals cannot be made until the child turns 18, at which point the account is treated like a traditional IRA.
- Contributions grow tax-free, and withdrawals for qualified purposes (e.g., education, first-home purchases, or healthcare expenses) are also tax-free.
- The accounts can be funded by parents, grandparents, or other relatives
The introduction of Trump Accounts extends planning opportunities, but these accounts are still fairly limited in scope — as of this writing, only those born this year and through the end of 2028 are eligible. And investment selection is limited. Still, the administration estimates that, by maximizing contributions, this account could exceed $300,000 by age 18 and almost $1.1 million by age 28.
529 plans
Families can now withdraw up to $20,000 per student, per year for qualified K–12 expenses (up from $10,000). This includes tuition plus an expanded list of eligible costs — like books/materials, qualified tutoring, certain online learning tools, standardized test fees, and educational therapies for students with disabilities.
Moreover, 529 funds can be used for approved career credentials, certificates, and continuing-education programs — not just traditional college degrees.
Retirement Planning Impact
Consider gifting strategies: Work with an advisor to determine whether Trump Accounts, 529 plans, or a combination of the two are best for you.
Open accounts early: Before 529 plans can be rolled over tax- and penalty-free into a Roth IRA, they must be open for at least 15 years. So, it’s advantageous to start 529s as soon as possible — even with modest initial contributions.
Verify program eligibility: Before using 529s for non-degree coursework, confirm the program qualifies under IRS guidance to avoid unexpected taxes or penalties.
Coordinate with estate planning: Funding education accounts can serve as a strategic way to shift assets out of your estate while directly benefiting family members.
Higher Lifetime Gift and Estate Tax Exemption
The federal lifetime gift and estate tax exemption was set to revert to $5 million per person at the end of 2025, according to sunset provisions in the Tax Cuts and Jobs Act (TCJA) of 2017.
Under the OBBB, this threshold has been indefinitely raised to $15 million ($30 million for married couples), starting in 2026. It will continue to be indexed to inflation each year, and the tax rate on amounts above the threshold will remain 40%
This delivers long-sought certainty for wealth transfer. Affluent families and business owners can plan multi-year transfers and trust strategies knowing the federal exemption won’t drop anytime soon.
For Minnesotans, the state estate tax ($3 million individually, or $6 million for married couples) can still bite well below federal levels, so layering strategies is still important.
Retirement planning impact
Use exemption strategically: Without a “use it or lose it” deadline, you can now phase gifts to beneficiaries across years to align with valuations, family timing, and control needs.
Coordinate with MN rules: For Minnesota residents, integrate charitable bequests, life insurance, and lifetime gifts to manage exposure to the state estate tax.
What the One Big Beautiful Bill Means for Retirees and Investors
The OBBB impacts several pillars of financial and retirement planning — from how income is taxed to how families save, gift, and transfer wealth. While some of these provisions offer relief, others tighten phaseouts or create new complexity. Now is the time to review and update your plan accordingly.
A few examples of what that looks like in practice:
- Tax coordination matters more than ever. With multiple phaseouts and AGI-based benefits now in play, timing distributions, conversions, and charitable gifts can meaningfully affect your total tax bill.
- Family wealth planning just expanded. Between Trump Accounts and enhanced 529 plan flexibility, grandparents and parents can fund education tax-free while reducing future estate exposure.
- Estate planning regained permanence. The $15 million lifetime exemption removes the sunset uncertainty, giving families a durable framework for gifting, trust creation, and multigenerational transfers.
Ultimately, OBBB gives retirees and investors new levers to pull but also new traps to avoid. The difference between taking advantage of these rules and being caught off guard often comes down to proactive planning.
If you’re unsure how the One Big Beautiful Bill impacts your tax, investment, or retirement plan, reach out to the team at Pine Grove to review your strategy with clarity and confidence.
