Retirement Tax Planning Just Got a Big Makeover

The transition into retirement can bring a lot of apprehension, and let’s be honest, uncertainty about tax and economic changes doesn't help the mood. But there is a silver lining for those of us nearing the retirement finish line in 2026.

The passage of the One Big Beautiful Bill Act, or the OBBBA, has fundamentally shifted the landscape by making many previous tax provisions permanent while introducing new temporary breaks that we need to jump on before they vanish. Retirement planning is a marathon, not a sprint, and your tax strategy is what keeps you from hitting the wall at mile twenty.

One of the most immediate opportunities involves the new temporary deductions designed to help older adults. If you are 65 or older, the OBBBA allows for a new senior deduction of $6,000 for individuals with a modified adjusted gross income up to $75,000. This is a huge win because you can take it regardless of whether you itemize your deductions. However, these perks are on a timer and are currently set to expire at the end of 2028. It is all about managing your income today to make sure you stay within the limits to qualify for these "use it or lose it" benefits.

When we look at the bigger picture, tax diversification is the name of the game. Most people focus on investment diversification, but having your money spread across taxable, tax-deferred, and tax-exempt accounts is what gives you real control over your tax bill in retirement. If you have a traditional IRA or an old 401k, a Roth conversion might be a powerhouse move right now. By converting some of those funds, you pay the tax today at current rates so that your future withdrawals may be entirely tax-free. This is especially helpful if you think your tax rate might actually be higher once you stop working.

⭐ 5 star tip: Discuss a Roth conversion with a professional before you pull the trigger. It is much easier to avoid a tax mistake today than it is to try and fix it with the IRS later!

Beyond conversions, we have to talk about how we handle our charitable giving and standard deductions. For 2026, the standard deductions are quite high, sitting at $16,100 for singles and $32,200 for married couples. Because of this, it might not be worth itemizing every single year. Instead, consider a strategy called bundling. You can take the standard deduction this year and save up your charitable gifts, property taxes, and medical expenses to stack them all into 2027. This pushes your total deductions over the threshold in that specific year, giving you a much bigger bang for your buck.

If you are already 70.5 or older, you have an even better tool: the Qualified Charitable Distribution, or QCD. You can distribute up to $108,000 directly from your IRA to a qualified charity without it ever hitting your taxable income. If you are 73 or older, this move even counts toward your Required Minimum Distribution. It is a sophisticated way to give back while keeping your adjusted gross income lower, which can help you avoid higher Medicare premiums or extra taxes on your Social Security.

Finally, remember that the OBBBA also updated the rules for the next generation. We now have "Trump accounts" for children under 18, which are new tax-deferred accounts that eventually turn into traditional IRAs. Between these and expanded 529 plans, there are more ways than ever to seed a solid financial foundation for your grandkids while managing your own legacy. Tax laws are always in flux, and while permanent usually just means until the next administration, staying proactive today ensures you aren't caught off guard tomorrow.

👉 Are you looking for a fee-only advisor to work with? Book your free discovery call and let’s start the conversation.

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John Piershale, CFP®, AEP®

Fee-Only and Fiduciary Advisor

NAPFA-Registered Financial Advisor

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This article is for educational purposes only and is not legal or tax advice. Please consult an attorney or tax advisor regarding your personal situation. Piershale Wealth Managemen

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