For the last few years, many people approaching retirement felt pressured to make tax decisions quickly. The scheduled expiration of the Tax Cuts and Jobs Act led to concerns about higher future tax rates, pushing some to consider Roth conversions or income shifts sooner than planned.
Whether you’re in the retirement planning phase of your life or already retired, you may have felt a bit of a relief from the pressure as the One Big Beautiful Bill Act (OBBBA) became law in July 2025. The new legislation made most of the TCJA’s lower tax brackets permanent and introduced several new deductions and savings options. (We recently broke down what this means specifically for business owners in a separate article –The One Big Beautiful Bill Act: What Business Owners Need to Know About the Latest Tax Changes.)
With these rules now in place, it’s a great time to revisit your retirement plan. The new tax landscape may be more favorable than many people expected, but that doesn’t mean you should stay on autopilot. Updated brackets, deductions, and planning opportunities can change how much income you keep—and how you sequence withdrawals over time. Taking a fresh look now helps ensure your strategy reflects the new numbers, not outdated assumptions.
What The One Big Beautiful Bill Act Actually Does
Lower tax rates and wider brackets
The OBBBA keeps in place the lower ordinary income tax rates and wider brackets introduced by the TCJA. The top marginal rate stays at 37% and the 10% and 12% brackets get a minor inflation adjustment. In 2026 the seven‑bracket system remains: 10%, 12%, 22%, 24%, 32%, 35% and 37%. For high earners, the top 37 % bracket won’t kick in until $640,600 of taxable income for singles, $768,700 for married couples filing jointly, and $725,200 for heads of household. (Source: IRS.gov)
Standard deduction becomes even more generous
The law preserves and slightly increases the standard deduction that was scheduled to be cut in half next year. The standard deduction jumps to $16,100 for single filers, $32,200 for married couples filing jointly and $24,150 for heads of household in 2026. The increase is larger than inflation due to a mid‑year boost in 2025. Because the vast majority of taxpayers take the standard deduction, this increase boosts after‑tax income for most retirees.
New deductions and enhancements
● Senior bonus deduction –Taxpayers age 65 or older can claim an additional $6,000 deduction per person ($12,000 if both spouses qualify) from 2025 through 2028. The deduction phases out starting at $75,000 of modified adjusted gross income (MAGI) for singles and $150,000 for married couples. This is in addition to the existing extra standard deduction for seniors.
● Enhanced SALT deduction – The cap on state‑and‑local‑tax deductions rises from $10,000 to $40,000 between 2025 and 2029 before reverting to $10,000 in 2030. The higher deduction phases out for MAGI over $500,000.
● Charitable deduction for non‑itemizers – Starting in 2026, non‑itemizers can deduct $1,000 (single) or $2,000 (married filing jointly) for charitable contributions. Itemizers must surpass 0.5 % of AGI to deduct additional giving and the value of the deduction is capped at 35 %.
● HSA and car loan benefits – The OBBBA expands Health Savings Account (HSA) eligibility to all bronze and catastrophic ACA plans and boosts HSA contribution limits to $4,400 for individuals and $8,750 for families. It also introduces a temporary deduction for up to $10,000 of interest on a new car loan, subject to income limits.
● Estate tax and other changes – The federal estate tax exemption, previously set to fall in 2026, is made permanent and increased to $15 million. The bill also creates “Trump accounts” for children (tax‑deferred accounts with small government contributions) and adds deductions for overtime and tips.
2026 Contribution Limits and Retirement Plan Updates
The IRS annually updates contribution limits for retirement accounts. For 2026 the limits are significantly higher, offering pre‑retirees more room to save before retiring.
● 401(k), 403(b) and 457 plans: The annual contribution limit rises to $24,500, up from $23,500 in 2025. Workers aged 50 or older can contribute an extra $8,000 catch‑up contribution, bringing their total to $32,500. A special catch‑up limit of $11,250 remains for those aged 60–63. (Learn more about how much you should contribute to your 401(k) or TSP here.)
● Traditional and Roth IRAs: The IRA contribution limit increases to $7,500, with an additional $1,100 catch‑up for savers aged 50 or older.
● Roth income phase‑outs: For Roth IRA contributions in 2026, the income phase‑out range rises to $153,000–$168,000 for single filers and $242,000–$252,000 for married couples.
These higher contribution limits, combined with low tax rates, give pre‑retirees more flexibility to maximize tax‑advantaged saving.
Strategies for Pre‑Retirees
1. Maximize contributions and take advantage of Roth options
With the OBBBA extending low rates and boosting contribution limits, pre‑retirees should ramp up savings. Workers under 50 can contribute $24,500 to their 401(k) plans and still add a Roth IRA if income permits.
Those over 50 can put $32,500 into employer plans and $8,600 ($7,500 plus catch‑up) into an IRA. Secure 2.0 mandates that higher‑income workers ($150,000 or more in FICA income) make catch‑up contributions to Roth rather than traditional 401(k) accounts starting next year. That makes now a good time to decide whether additional Roth savings fit into your plan.
2. Use bracket management to optimize conversions
The OBBBA’s permanent seven‑bracket system eliminates the fear of a sudden rate jump. However, staying within a lower bracket still matters. If you expect higher income later (for example, from Social Security, pensions or required minimum distributions), you might convert some traditional IRA balances to Roth before 2026.
Conversely, if you’re near the SALT deduction phase‑out at $500,000 of MAGI, you may want to reduce conversions to preserve the larger deduction. Planning your conversions across several years can smooth out tax impacts and avoid pushing your income above key thresholds.
3. Plan around the new deduction for charitable contributions
The OBBBA introduces a $1,000 ($2,000 for couples) charitable deduction for non‑itemizers and a 0.5% AGI floor for itemizers. Pre‑retirees can bunch donations into a single year to surpass the 0.5% floor, use donor‑advised funds, or donate appreciated securities to maximize the tax benefit. If your giving does not exceed the floor, you’ll still get the $1,000/$2,000 deduction without itemizing.
4. Review health and family savings
Changes to HSA eligibility and limits mean more people can save for future medical expenses pretax. If your health insurance plan qualifies, consider funding an HSA up to the 2026 limits ($4,400 individual, $8,750 family).
The new “Trump accounts” allow parents and grandparents to contribute up to $5,000 annually for children born between 2025 and 2028, with a $1,000 government match. Although these accounts have limited early benefits and complex rules, they might appeal to families looking to leave tax‑deferred gifts.
5. Re‑evaluate your estate and gifting plans
The permanent increase of the estate tax exemption to $15 million may reduce the urgency of large lifetime gifts. You may choose to keep assets invested longer, but still consider using annual exclusion gifts or Roth conversions to transfer wealth tax‑efficiently. It’s best to speak with your estate planning attorney and financial advisor about how charitable trusts and donor‑advised funds can help you leverage this updated exemption amount.
Strategies for Retirees
1. Leverage the Senior Bonus Deduction
Retirees aged 65 and older can claim a $6,000 deduction per person on top of the standard deduction. Married couples where both spouses are 65 qualify for $12,000. However, the deduction phases out as MAGI rises beyond $75,000 (single) or $150,000 (married).
Retirees should manage income (perhaps by taking distributions before RMDs kick in or converting funds to Roth IRAs) to stay within the threshold. For early retirees not yet taking Social Security, there’s room to control MAGI by tapping taxable accounts, performing partial Roth conversions, or delaying pension start dates.
2. Take advantage of higher SALT and charitable deductions
High‑tax‑state retirees benefit from the SALT deduction cap of $40,000 through 2029. If your income hovers near the $500,000 MAGI threshold where the deduction phases out, consider deferring income or accelerating deductible expenses like property taxes.
Meanwhile, the charitable deduction for non‑itemizers lets retirees who take the standard deduction give up to $1,000 ($2,000 for couples) and still reduce taxable income. This encourages philanthropy without the paperwork of itemizing.
3. Coordinate Social Security, RMDs and withdrawals
Your Social Security benefits may still be taxable under the new rules, depending on your combined income—which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. If that total exceeds $25,000 for single filers or $32,000 for married couples filing jointly, a portion of your benefits becomes taxable.
The Senior Bonus Deduction and larger standard deduction reduce the taxable portion of distributions, but watch for Medicare premium surcharges if MAGI climbs. Required minimum distribution (RMD) ages remain unchanged by the OBBBA; under Secure 2.0, RMDs start at 73 for those born 1951–1959 and at 75 for those born in 1960 or later.
4. Consider tax‑efficient giving
The new charitable deduction floor means retirees who itemize should donate more than 0.5% of AGI to realize an additional tax benefit. Qualified charitable distributions (QCDs) from IRAs still allow direct transfers to charities starting at age 70½ and avoid including the withdrawal in income. Combining QCDs with the standard deduction and senior deduction can dramatically lower taxable income. For those who no longer itemize, giving up to $1,000/$2,000 will still be deductible.
5. Align your spending with new limits
Retirees often worry about overspending when the market is volatile. The OBBBA provides clarity on future tax rates, which means your withdrawal strategy can focus more on market conditions and personal goals than on looming tax spikes. Use the higher standard deduction and senior deduction to shield part of your withdrawals from tax. And remember that the 401(k) contribution limit is now $24,500 for working retirees, with an $8,000 catch‑up. If you’re still consulting or working part‑time, take advantage of these higher limits.
Are You Prepared for the 2026 Tax Law Changes?
Planning for retirement is always a moving target, but the OBBBA offers a period of relative stability. The law locks in lower tax brackets, raises the standard deduction and creates new opportunities for seniors, savers and charitably inclined households.
Pre‑retirees can use the next few years to boost savings, manage brackets and optimize Roth conversions, while retirees may be able to leverage the senior deduction and SALT cap amongst other strategies.
Now is a smart time to review how the latest tax law changes affect your financial plan and your retirement numbers. A thoughtful check-in can help confirm you’re on track or uncover opportunities you may be missing. Click here to schedule a call with one of our financial advisors to review your retirement plan and make sure the new tax rules are working in your favor.
Disclosures:
We are not tax advisors and nothing in this article is meant to be taken as tax advice. Please consult a tax professional with any tax-related questions specific to your situation.Jaffe Tilchin Investment Partners is a Registered Investment Advisor. Certain representatives of Jaffe Tilchin Investment Partners are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC. 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211 Check the background of this firm on FINRA’s BrokerCheck.
