Since it became law, estate planning attorneys, tax experts and financial gurus have been parsing the OBBB, looking for opportunities, benefits and pitfalls. A recent article from Kiplinger, “Potential Trouble for Retirees: A Wealth Advisor’s Guide to the OBBB’s Impact on Retirement,” highlights some possible problems for retirees.
What to Watch Out For
The big picture? Retirees need to be careful about Roth conversions, charitable donations, health care expenditures and provisions that might push them into a higher tax bracket.
Roth IRA Conversions
Roth conversions used to be a good way to control future taxes. With today’s lower rates, many retirees converted pre-tax IRA funds to Roth IRAs to lock in rates and enjoy tax-free growth. However, this isn’t a slam dunk anymore. The new bonus deduction for people ages 65 and older lowers taxable income but does not lower Adjusted Gross Income. Roth conversions increase AGI, which impacts Social Security taxes and IRMAA surcharges on Medicare. It’s referred to as a “sneak attack,” where you may stay in the same tax bracket but pay thousands more to Medicare premiums or even lose Social Security purchasing power.
Don’t abandon Roth conversions but be careful. Smaller conversions over several years may work better. And run multi-year tax projections, including Social Security taxes and IRMAA thresholds.
Estate Tax Exemptions Don’t Remove Need for Estate Planning
The bill raised federal tax exemptions. However, for most retirees, this does nothing to ease the burden of estate clarity, tax efficiency, or family coordination. Many people think that if they’re under the exemption limit ($15 million per person until 2030), they don’t need an estate plan—big mistake. Estate planning attorneys know estate planning has less to do with taxes and everything to do with beneficiary designations, instructions for incapacity and health care decisions, family disputes about property, debt and inheritance, and charitable or legacy goals. Regardless of your net worth, you need a current will, powers of attorney, healthcare directives and coordinated beneficiary structures.
Changes to Medicare
Be prepared for changes to Medicare costs. To fund permanent tax cuts, the OBBB included more than $490 billion in Medicare reductions in the next ten years. The law doesn’t give specifics, but the money must come from somewhere. Plan for higher Part B and D premiums, reduced coverage from Medicare Advantage plans, lower provider reimbursements, making it harder to find care, and more out-of-pocket expenses for medications or specialist visits. Plan for increased healthcare costs, review supplemental policies carefully and don’t assume last year’s plan will work in years to come.
Income Tax Implications
The OBBB keeps lower income tax brackets, but those brackets interact with other parts of the tax code in ways retirees may not expect. For example, Required Minimum Distributions (RMDs) stack up on top of other income. Capital gains could become taxable when combined with dividends, pensions, or Social Security. Even if your marginal tax bracket doesn’t change, you might find yourself in a higher effective tax rate.
Get Professional Help
Talk with an experienced estate planning attorney about how these changes may impact your overall tax liability and see if there are any strategies appropriate to your situation to minimize their impact. Contact our office today to get started.
Reference: Kiplinger (Sep. 14, 2025) “Potential Trouble for Retirees: A Wealth Advisor’s Guide to the OBBB’s Impact on Retirement”
