October 28, 2025
OBBBA: Integrating Healthcare and Retirement Planning
This is the final article in my three-part series on the One Big Beautiful Bill Act (OBBBA). In the first two articles, I covered the bill's impact on income tax planning and estate strategies. Now, I will bring it all together by focusing on two of the most critical components of a secure retirement: healthcare costs and retirement account management.
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For many affluent retirees, managing rising healthcare expenses while optimizing retirement income is a significant challenge. The OBBBA introduces changes that directly affect Medicare costs and retirement withdrawal strategies, creating new planning needs. My goal with this final piece is to provide a clear roadmap for integrating these financial decisions, helping you preserve your wealth and maintain your desired lifestyle with confidence.
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Managing Medicare Costs: The IRMAA Challenge
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One of the most immediate financial impacts of the OBBBA for affluent retirees involves Medicare Part B and Part D premiums. The bill modifies the income thresholds for the Income-Related Monthly Adjustment Amount (IRMAA), which can significantly increase your healthcare costs in retirement.
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IRMAA is a surcharge that high-income beneficiaries pay in addition to their standard Medicare premiums. The amount you pay is based on your Modified Adjusted Gross Income (MAGI) from two years prior. The OBBBA has adjusted these income tiers, making proactive income management more critical than ever.
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Why This Matters: A small increase in your MAGI can push you into a higher IRMAA bracket, leading to a substantial jump in your annual Medicare premiums. For a married couple, this could mean paying thousands of dollars more per year for the same coverage.
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Actionable Strategies to Manage IRMAA
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Careful planning can help you manage your income to avoid or reduce these surcharges. The key is to control your MAGI, which includes income from sources like retirement account distributions, capital gains, and interest.
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1. Strategic Roth Conversions: As I discussed in the first article, converting funds from a traditional IRA or 401(k) to a Roth IRA creates taxable income in the year of the conversion. While Roth conversions are a powerful long-term strategy, they must be timed carefully.

o Action Step: Before executing a conversion, calculate its impact on your MAGI for the current year. This will determine your IRMAA surcharges two years from now. Consider spreading larger conversions over several years to stay below key IRMAA thresholds.
2. Using Non-Taxable Income Sources: Your retirement income doesn't have to come solely from taxable accounts. Structuring your withdrawals can provide cash flow without inflating your MAGI.
o Action Step: In years when your income is approaching an IRMAA cliff, consider drawing funds from a Roth IRA (withdrawals are tax-free), the principal from a brokerage account, or cash value from a life insurance policy.
3. Qualified Charitable Distributions (QCDs): If you are over age 70½, you can donate up to$105,000 annually directly from your IRA to a qualified charity. A QCD satisfies all or part of your Required Minimum Distribution (RMD) but is excluded from your taxable income.​​​
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o Action Step: Using QCDs is an excellent way to support causes you care about while directly reducing your MAGI, which can help you stay in a lower IRMAA bracket.
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Evolving Retirement Account Strategies Under OBBBA
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The OBBBA also introduces new dynamics for managing retirement accounts, particularly concerning Roth IRAs and Required Minimum Distributions (RMDs). Integrating these changes with your tax and estate plans is essential for long-term wealth preservation.
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The New Landscape for Roth IRAs
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The OBBBA makes the tax benefits of Roth accounts even more valuable, especially when coordinated with the permanent estate tax exemptions. While your contributions to a Roth IRA are made with after-tax dollars, the qualified distributions are tax-free.
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Enhanced Conversion Opportunities: With the lower personal income tax rates now permanent, the "cost" of converting traditional IRA funds to a Roth IRA is fixed and predictable. This provides a clear window to move assets from a tax-deferred status to a tax-free one.
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Planning Insight: For affluent retirees, a well-executed series of Roth conversions can significantly reduce future RMDs and create a pool of tax-free money to draw from. This provides flexibility to manage taxable income in later retirement years, which in turn helps control IRMAA surcharges.
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Health Savings Accounts (HSAs) as a Retirement Tool
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An often-overlooked strategy is leveraging a Health Savings Account (HSA) as a supplemental retirement vehicle. An HSA offers a unique triple tax advantage:
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1. Contributions are tax-deductible.
2. The funds grow tax-deferred.
3. Withdrawals for qualified medical expenses are tax-free.
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After age 65, you can withdraw funds from an HSA for any reason without penalty, though non-medical withdrawals are subject to ordinary income tax (similar to a traditional IRA).
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o Action Step: If you are still working and enrolled in a high-deductible health plan, consider maxing out your HSA contributions. The funds can be invested and grown over time, creating a dedicated, tax-advantaged source to pay for future healthcare costs, including Medicare premiums.
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Bringing It All Together: A Holistic Approach
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The provisions of the OBBBA do not operate in a vacuum. Effective financial planning requires a cohesive strategy that integrates income planning, estate goals, and healthcare cost management.
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Scenario Example:
Consider a 64-year-old married couple with a $5 million estate, mostly in traditional IRAs.
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The Challenge: Without a plan, their future RMDs will create a large tax burden and likely push them into high IRMAA brackets, increasing their Medicare costs. Their estate, while below the new federal exemption, could be subject to state estate taxes, and the income tax on inherited IRAs for their children will be substantial.
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The Integrated Solution:​
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1. Income & IRMAA Planning: They begin a series of partial Roth conversions before their RMDs start, carefully planning each conversion to stay within a targeted tax bracket and avoid the highest IRMAA surcharges.
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2. Healthcare Savings: They use their HSA to pay for their Medicare Part B premiums, allowing their other invested assets to continue growing.
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3. Estate & Legacy Planning: The Roth conversions reduce the size of their taxable estate and provide their heirs with a tax-free inheritance. They use QCDs to fulfill their charitable goals, further reducing their taxable income.
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This methodical approach turns separate financial challenges into a unified and optimized plan, securing their retirement and preserving their legacy.
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Final Thoughts on the OBBBA Series
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Throughout this series, my goal has been to demystify the One Big Beautiful Bill Act and provide you with actionable strategies. We have explored how its permanent tax provisions create certainty for income planning, how the increased exemptions revolutionize estate and legacy goals, and how you can now proactively manage healthcare costs in retirement.
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The OBBBA, while complex, presents a significant opportunity for affluent retirees and pre-retirees to fortify their financial futures. By taking a comprehensive approach and planning with precision, you can navigate these changes with confidence and achieve peace of mind.
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If you’d like to discuss how these strategies apply to your personal financial situation, I am here to help. Please reach out to Darlene at darlene@shepherdwealth.com or 520-325-1600 ext. 1, or CLICK HERE to schedule a time for us to talk.
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David W. Shepherd Jr. CFP®
CEO
6300 E El Dorado Plaza, Suite A200
Tucson, AZ 85715
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david@shepherdwealth.com
Phone: 520-325-1600
Fax: 520-325-9097
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