How the One Big Beautiful Bill Will Affect Your Retirement
If you’ve paid attention to the news recently, you’ve probably seen headlines about the newly passed One Big Beautiful Bill.
Let’s call it the OBBB.
There’s been a lot of buzz, some conflicting reports, and plenty of political opinions. But regardless of how it’s being talked about, this bill introduces several important updates that could impact your retirement.
As with most government legislation, the details aren’t always clear.
But that’s where we come in. Our goal is to help make the complex simple.
In this post, we’ll break down four of the most impactful changes and what they could mean for your retirement.
1. The “Trump Tax Cuts” Are Now Permanent
Back in 2017, the Trump administration passed a major piece of tax legislation known as the Tax Cuts and Jobs Act (TCJA). It made several big changes, including lowering income tax brackets, nearly doubling the standard deduction, and increasing the estate tax exemption.
But those changes were set to expire at the end of 2025…until now.
The OBBB makes those tax cuts permanent.
Why That Matters
Many retirees and pre-retirees were facing the potential of higher taxes starting in 2026 if those provisions were allowed to sunset.
This would’ve meant thousands more in taxes each year for many families, especially those drawing from retirement accounts or receiving Social Security benefits.
Not all tax brackets were affected equally, but several of the most common ones were set to increase. Here’s a simple comparison of what those brackets would have reverted to vs. what they will now remain under the OBBB:
Note: The taxable income ranges shown here reflect the 2025 brackets prior to the One Big Beautiful Bill (OBBB). Under OBBB, these same marginal tax rates remain in place, but the income thresholds have been slightly increased through enhanced inflation adjustments—meaning more of your income may fall into lower tax brackets compared to the pre-OBBB baseline.
This isn’t just about keeping your taxes lower now.
It also opens up continued opportunities for strategic planning, such as Roth conversions while rates are historically low, during that “sweet spot” between the start of retirement and the beginning of Required Minimum Distributions (RMDs).
A Bigger Standard Deduction = More Tax-Free Income
The bill also makes the higher standard deduction permanent.
For joint filers in 2025, it will be $31,500, and indexed for inflation going forward.
For retirees whose income is primarily Social Security and modest withdrawals from investments, this could mean paying little to no federal income tax.
Estate Tax Exemption Raised—Big Time
The estate and gift tax exemption will also remain elevated at $30 million per couple, allowing families to pass on more wealth without triggering estate taxes.
If you’ve “lived like no one else” so you can “live and give like no one else,” this gives you the chance to do just that, and change your family tree for good.
2. A Bigger Deduction for Property Taxes
For those who itemize deductions, especially folks who give generously to their church or other causes, property taxes have long played a key part in reducing taxable income.
One of the more impactful updates in the new law is a substantial increase to how much property tax you can deduct as part of your state and local tax (SALT) deduction.
What Changed
Previously, the deduction for combined state and local taxes (property + income or sales tax) was capped at $10,000 per year. Under the OBBB, that cap has been raised to $40,000 per year.
Here’s what that means for you:
You can now deduct up to $40,000 in combined property taxes and either income or sales taxes
The cap begins to phase out once income exceeds $500,000 of modified adjusted gross income (MAGI), but this won’t affect most households
The expanded deduction is scheduled to remain in effect through 2029 and revert to $10,000 in 2030 unless extended
If you’ve been on the edge between taking the standard deduction and itemizing, this update may tip the scales, especially when combined with charitable giving.
3. No, Social Security Isn’t Tax-Free Now, But the Senior Deduction Helps
Let’s clear up one of the biggest misconceptions about this bill: Social Security income is not tax-free under the OBBB.
Up to 85% of your Social Security benefits may still be taxable, depending on your total income.
However, there is a new provision designed to reduce that tax burden for older Americans.
What’s the New Senior Deduction?
Starting in 2025 and running through 2028, taxpayers age 65 or older will receive a $6,000 per-person deduction—or $12,000 for a married couple.
Here’s what makes it powerful:
It can be used in addition to the standard deduction or itemized deductions
It stacks on top of the existing age 65+ standard deduction increase
It helps reduce taxable income at a time when many retirees are living on relatively modest withdrawals
However, the deduction begins to phase out for higher-income households, so those with substantial income from pensions, Social Security, or investments may see a reduced benefit, with the deduction being completely phased out above $250,000 in income for joint filers
When combined with the newly permanent standard deduction, this could drastically reduce or even eliminate your tax bill if you’re living primarily on Social Security and modest investment withdrawals.
A Strategic Window for Roth Conversions
This deduction also opens the door for strategic tax planning.
If you’re in the “retirement tax sweet spot,” those years between when you stop working and when RMDs begin, it might make sense to convert some of your pre-tax retirement savings into Roth IRAs.
You’d be locking in low tax rates while starting the clock on future tax-free growth.
4. Trump Accounts: A New Way to Help Kids and Grandkids Save
A common question we hear from parents and grandparents is: “How can I help my kids/grandkids save while they’re young?”
Why Not Just Use a 529 or Roth IRA?
529s are limited to education expenses—and many families worry about overfunding them.
Roth IRAs require earned income, which most children don’t have unless they’re legitimately working.
That’s Where Trump Accounts Come In
Set to begin in July 2026, Trump Accounts are a new kind of tax-deferred investment account for minors. Here’s what we know so far:
Available to children under 18
Up to $5,000 per year, per child
No earned income required
Contributions made with after-tax dollars
Growth is tax-deferred and taxed upon withdrawal
A Few Restrictions
Investments must be in qualified index funds like the S&P 500 or Russell 2000
No individual stocks or sector-based funds
Details after age 18 are still being finalized, but they may function like traditional IRAs
One Bonus: A $1,000 Head Start
As part of a new pilot program, the government may offer a $1,000 credit into Trump Accounts for children born in 2025, 2026, or 2027.
This “new child bonus” could help families jumpstart long-term savings from day one.
Like any new program, the logistics are still being worked out, but the concept offers a powerful new tool for legacy-minded families.
Moving Forward
There’s a lot of noise out there about the One Big Beautiful Bill, and the truth is, we’ve only scratched the surface here.
But these are some of the most important provisions that could affect your retirement income, tax planning, and legacy goals.
While we can’t control what laws are passed, we can choose how we respond.
The right planning, especially with taxes, can have a lasting impact on your future.
If you have questions about how this affects your plan, or you’re looking for guidance on how to make the most of the new rules, we’re here to help.
Our goal is to simplify the complex and help you live your best financial life with purpose and clarity.
Steven Fronrath
Vice President | Wealth Advisor
Kennedy Financial Group
This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax advice. You should consult with your tax advisor for guidance on your specific situation.