What Seniors Need to Know About The One Big Beautiful Bill and Their Retirement Plans
Well ... we were wrong.
During our previous discussion about The One Big Beautiful Bill, we predicted that the final law would probably pass with a different name.
But, instead of the acronyms we're used to seeing lately, like the SECURE Act (Setting Every Community Up for Retirement Enhancement), President Trump and Congress stuck with the original title. For the most part, the final bill also maintains the big picture tax policy objectives that President Trump has been discussing since the start of his second term.
On today's show, we focus on the portions of the One Big Beautiful Bill that could have the biggest impact on retirement planning.
1. Locking in Tax Rates
In 2017, Congress passed the Tax Cuts and Jobs Act, which established seven lower tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. Those rates were set to expire at the end of the year. The OBBB makes those rates permanent, meaning that Congress would have to pass new legislation to change them. The amount of income taxed at those rates will change annually based on inflation.
2. A Higher Standard Deduction
The Tax Cuts and Jobs Act also raised the standard tax deduction—so much so that over 90% of filers now take it rather than itemizing. The OBBB makes this change permanent and raises the standard deduction for 2025 to $15,750 for individuals and $31,500 for married couples.
3. A Temporary "Bonus" for Seniors
On top of locking in the higher standard deduction, the OBBB also provides a $6,000 "senior bonus" for individuals 65 and older, whether they itemize or not. This bonus does phase out at modified adjusted gross income levels of $75,000 for single filers and $150,000 for married couples filing jointly. And it expires in 2028.
4. A Higher SALT Cap
The OBBB raises the state and local tax deductions (SALT) cap from $10,000 to $40,000 for folks who itemize through 2029. The new cap is phased out for married couples filing jointly whose modified adjusted gross income is more than $500,000, but SALT does not drop below $10,000. These new caps will certainly help affluent folks who live in large coastal cities, but they could also benefit seniors who are thinking about relocating in retirement to places with higher state and local taxes.
5. Tips and Overtime
The new deductions for tips and overtime income affect a rather narrow group of workers, and an even narrower group of seniors. But it's newsworthy that the OBBB did follow through on a hot campaign trail topic. Individuals and couples filing jointly can now deduct up to $25,000 in annual tip income. Individuals can also deduct up to $12,500 in overtime pay, and joint filers can deduct up to $25,000. Phase-outs for both deductions start at $150,000 for individuals and $300,000 for joint filers, and both deductions are set to expire in 2028.
6. Auto Loan Interest
Some of our older listeners may remember that auto loan interest used to be tax deductible. The OBBB brings back that deduction through 2028 for new cars that are assembled in the United States. Expect to see a rash of ads from your local car dealerships for vehicles that are eligible for this deduction. But this deduction also has phase-outs at $100,000 of income for individuals and $200,000 for joint filers. And as the government shifts its incentives towards a different type of car, it's also eliminating tax credits for electric vehicles (EVs).
7. New Accounts for New Babies
Parents of babies born between 2025 and 2028 can now open a tax-deferred "Trump Account" in the child's name and receive a $1,000 seed investment from the federal government. While we're still waiting for some additional details around how these investment accounts will work, an additional $5,000 can be deposited every year by parents, family, and friends. Additionally, a parent's employer can contribute $2,500 per year tax free, which opens up some interesting new options for benefits packages. When they turn 18, account holders can use the money for things like education, buying a first home, or starting a business.
The Best Retirement Incentives
The Keen on Retirement podcast now spans across four presidential terms. In all that time, we've covered significant legislation from both sides of the aisle with wide varieties of policy objectives and incentives for individuals.
But while the details have been different, one overriding theme in the government's recent approach to financial planning has been that you have to take control, especially as you prepare for retirement.
As folks continue to live longer and stay more active, Social Security and Medicare just won't be enough to secure retirement for most seniors. That's especially true if you have major bucket list goals for the second half of your life, like seeing the world, starting your own business, digging deeper into your hobbies, and enjoying more priceless moments with your loved ones.
Let's talk about how The Keen Wealth Advantage can help you plan for a big, beautiful retirement.
About Bill
Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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