How the "One Big Beautiful Bill" Impacts Retirees

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The “One Big Beautiful Bill” just became law—and it’s packed with changes for retirees.

Summary: The new "One Big Beautiful Bill Act," signed into law on July 4, 2025, brings both good news and caution flags for retirees. From tax breaks to healthcare cuts, here's what you need to know and how it could affect your retirement income, benefits, and planning strategy.

When you hear a name like the "One Big Beautiful Bill," you might expect all good news. And while this new law, signed on Independence Day 2025, does offer generous tax relief for retirees, it also introduces some significant changes to Medicare that could strain retirement budgets.

Here’s a breakdown of what’s inside this sweeping legislation and what it means for your retirement plan.

1. Tax Breaks That Boost Your Bottom Line

Let’s start with the good news: the bill locks in the lower tax brackets from the 2017 Tax Cuts and Jobs Act—so you can keep more of what you earn in retirement. It also adds a juicy bonus: a temporary $6,000 extra deduction for anyone age 65 and older (through 2028).

How this helps:

For a married couple both over 65, that’s a potential $12,000 off their taxable income, on top of the standard and age-related deductions.
Combined, this could allow a couple with $120,000 in income to deduct nearly $47,000, possibly keeping them in a lower tax bracket and reducing the taxability of their Social Security.

Example: A married couple, both age 67, with $90,000 in income from pensions and retirement withdrawals could see:

Standard deduction: ~$31,500
Age 65+ deduction: $3,200
Senior Bonus Deduction: $12,000
Total deductions: $46,700
Taxable income: $43,300

This keeps them in the 12% bracket and reduces their federal tax bill by around $1,500 compared to pre-OBBBA rules.

2. Social Security Tax Savings

Social Security benefits can be taxed—but only if your income exceeds certain thresholds. These thresholds haven’t been adjusted since 1984, which means more retirees are being taxed on their benefits simply due to inflation.

The IRS thresholds for Social Security taxation are:

Single filers: If your provisional income is between $25,000 and $34,000, up to 50% of your benefits may be taxable; above $34,000, up to 85% may be taxable.
Married filing jointly: If your provisional income is between $32,000 and $44,000, up to 50% of your benefits may be taxable; above $44,000, up to 85% may be taxable.

Provisional income includes your adjusted gross income (AGI), any tax-free interest (like municipal bonds), and half of your Social Security benefits.

Here’s where the One Big Beautiful Bill Act helps: it reduces your AGI by providing a new $6,000 deduction per person age 65 or older. Lower AGI = lower provisional income, which can mean less of your Social Security is taxable—or none at all.

What this means for you:

Stay under key thresholds and reduce your tax bill
Protect more of your Social Security from federal taxation
Enjoy higher net income in retirement

Example: Let’s say a couple has $24,000 in Social Security income and $66,000 from IRAs and other sources.

Without the new deduction, their AGI is $66,000 and provisional income is $78,000—so 85% of their Social Security is taxable.
With the new deduction, their AGI drops to $43,300, and their provisional income drops to $55,300.
They still exceed the $44,000 threshold, but now less of their Social Security is taxed—and their total tax bill drops by several hundred dollars.

This is one of the most overlooked but powerful features of the new law. Even if your income doesn’t seem high, the tax savings can really add up over a long retirement.

3. No Changes to IRAs and 401(k)s

Here’s some stability in the midst of change: the bill leaves retirement accounts like IRAs and 401(k)s untouched. Your contributions, growth, and withdrawals continue under the same tax rules.

Why this matters: Retirement account rules can change, and some proposals in the past have threatened Roth conversions or stretched IRAs. But for now, the familiar planning strategies remain intact:

Roth conversions while in lower tax brackets
Strategic withdrawals to manage income levels
Qualified charitable distributions (QCDs) for those 70½ and older

Example: If a couple takes $66,000 per year from their IRAs, their withdrawals are taxed at 12% under the OBBBA—rather than potentially reverting to a 15–25% rate. Over 20 years, this 3% savings could amount to over $30,000.

4. Medicare Cuts: What to Expect

One of the most debated elements of the bill is its projected $500 billion in Medicare spending reductions over eight years, beginning in 2026. These reductions are largely achieved through a 4% decrease in payments to healthcare providers.

How the 4% cut works:
This means that for every $100 Medicare pays a doctor, hospital, or clinic today, it will pay $96 starting in 2026. While this is a modest reduction, it could affect how some providers manage their Medicare patient load. It’s expected that most providers will adapt without major disruptions, though there may be isolated impacts depending on region and specialty.

Potential impact on retirees:
For most retirees, the direct effect will likely be limited. However, some Medicare Advantage plans may raise premiums slightly to account for changes in provider contracts or service availability. Traditional Medicare users are not expected to see immediate changes in their coverage or access.

Additional changes:

Medicare coverage eligibility rules are being tightened for non-citizens, requiring more frequent re-certifications and stricter documentation.
The bill authorizes the Centers for Medicare & Medicaid Services (CMS) to issue updated regulations in 2026, which may adjust the scope of services or payment models.

Example: A retired couple enrolled in a Medicare Advantage plan may see their monthly premium increase by $10–$20 per person starting in 2026, depending on their plan and region. Their access to doctors and specialists remains the same, but they may want to review their plan during the annual open enrollment period to compare costs and coverage.

Bottom Line

The One Big Beautiful Bill Act is a mixed bag for retirees. On one hand, it offers meaningful tax relief and preserves your retirement account advantages. On the other, it introduces some modest changes to Medicare that could slightly increase costs for some.

This is a great time to revisit your retirement plan and make sure you’re taking full advantage of the new tax rules—while staying informed about your Medicare options.

Remember, your retirement plan isn’t set-it-and-forget-it. It's a living, breathing strategy that should evolve with your life, your goals, and the laws of the land.

If you have questions about how this new law impacts you, we’re here to help. Let’s talk about how to adjust your plan so you can retire with confidence—no matter what Congress cooks up next.

Intermountain Wealth Management is a Registered Investment Adviser (RIA). The company manages several fee-based portfolios comprised of various equity and fixed-income investments that may include exchange traded funds (ETF’s), stocks and mutual funds. This is not a prospectus or an offer to sell any security. Please read the prospectus of any investment before you invest. The information included here is intended for education and information purposes only.