What the “One Big Beautiful Bill” Means for Your Retirement Taxes

Congress has passed a sweeping new tax reform package with significant implications for retirees and those approaching retirement. Nicknamed the “One Big Beautiful Bill,” this legislation brings both opportunities and risks—especially when it comes to retirement tax planning in 2025 and beyond.

At A Better Way Financial, we’re committed to helping retirees across the Lehigh Valley and beyond navigate these changes with clarity and confidence. Let’s break down what this new bill means and how you can position yourself for a more tax-efficient retirement.

Key Tax Benefits for Retirees

1. Increased Standard Deduction for Seniors

If you’re age 65 or older and meet income qualifications (under $75,000 single or $150,000 married), you’ll benefit from an increased standard deduction:

• +$6,000 for single filers
• +$12,000 for married couples filing jointly

This reduces your taxable income and may lower—or even eliminate—taxes on your Social Security benefits. That’s a big win for lower- and middle-income retirees who often rely heavily on fixed income.

2. Extended Tax Cuts and Jobs Act (TCJA) Rates

Originally scheduled to sunset in 2025, TCJA’s favorable tax brackets are now permanently extended—meaning lower income tax rates remain in effect. For retirees doing Roth conversions or drawing income from retirement accounts, this opens a long-term planning window for tax-smart withdrawals.

3. Higher State and Local Tax (SALT) Deduction Limits

SALT deduction limits have increased from $10,000 to up to $40,000, depending on your income. While Pennsylvania residents may see modest benefits (due to low state income tax), those with out-of-state property or higher tax burdens could gain significantly.

4. Increased Federal Estate Tax Exemption

The federal estate tax exemption jumps to $15 million, offering greater flexibility for families concerned about passing on wealth without triggering federal inheritance taxes.

Potential Downsides You Need to Know when it Comes to Retirement Planning

1. Rising National Deficit

The bill could add as much as $4 trillion to the national debt. Long-term, this could pressure lawmakers to reduce benefits or raise taxes in the future.

2. Cuts to Medicaid Eligibility

The law introduces new work requirements (80 hours/month) for able-bodied individuals receiving Medicaid, which could impact low-income pre-retirees or part-time workers.

3. Temporary Nature of Some Benefits

Many of the tax breaks (like the senior deduction and SALT expansions) expire in 2029. That means retirees have a limited window to take advantage of these changes—and need a plan in place now.

What You Should Do Next

Whether you’re already retired or planning to retire in the next few years, strategic retirement tax planning is more important than ever.

Here’s how we can help with your retirement tax planning:

• Map your income strategy around the updated tax brackets.
• Use Roth conversions during lower-tax years.
• Reduce taxes on Social Security by optimizing withdrawal timing.
• Plan for estate transitions with the new inheritance tax thresholds.

📘 Want to learn more? Check out our blog on Understanding the Four Tax Buckets for Retirement Planning to see how to structure your income streams more efficiently.

Let’s Talk About Your Retirement Tax Plan

The new law presents a limited-time opportunity. Book a complimentary 15-minute Retirement Discovery Call with a member of the A Better Way Financial team to receive your personalized Retirement Tax Analysis.

👉 Schedule Your Call