July 14, 2025
OBBBA: What Affluent Retirees & Pre-Retirees Need to Know
I am sharing this article, the first in a series of three, because the passing of the One Big Beautiful Bill Act can have far-reaching effects on your retirement and wealth management decisions, especially your taxes! My goal is to provide you with timely, accurate guidance so you can approach your financial planning with clarity and confidence, ensuring you can make informed decisions tailored to your situation. And who doesn’t want to minimize their tax bill as much as possible, right?
This bill is indeed big and very complex. For this article series, I’m only going to be focusing on the aspects that could have a significant effect on affluent retirees and pre-retirees.
The One Big Beautiful Bill Act (OBBBA): What
Affluent Retirees & Pre-Retirees Need to Know
Navigating retirement is a complex process even for the most prepared individuals, particularly those with significant wealth to manage. The recently enacted One Big Beautiful Bill Act (OBBBA)introduces several tax and financial planning changes that directly impact affluent retirees and pre-retirees. This legislation creates both opportunities and challenges, requiring careful planning to optimize its benefits while sidestepping potential pitfalls.
This article is the first in a three-part series aimed at helping affluent retirees understand the key implications of the OBBBA. Here, we’ll discuss the tax rate management and income optimization provisions, offering practical strategies to make the most of this sweeping legislation.
Understanding the OBBBA and Its Relevance to Affluent Retirees and Pre-Retirees
The OBBBA is a far-reaching bill with provisions designed to provide financial predictability and new planning opportunities for high-net-worth individuals. For retirees and pre-retirees, particularly those managing diverse portfolios and sophisticated financial situations, the bill’s permanent changes to tax rates and its new income optimization measures present significant financial implications. These provisions allow for more deliberate, phased strategies in retirement and estate planning.
Planning around the bill requires a good grasp of its impact on key areas like income taxation, capital gains, and deductions specific to many taxpayers. The long-term certainty it offers in some aspects of tax policy can be a silver lining amid the often unpredictable legislative landscape.
Key Tax Provisions That Impact Income Optimization
Permanent Tax Rate Extensions
The OBBBA made the lower personal federal income tax rates introduced under the Tax Cuts and Jobs Act of 2017 permanent. This means the top marginal tax rate will remain at 37%, as opposed to reverting to 39.6% as originally scheduled. For affluent retirees, this stability removes the urgency previously associated with rushing income or Roth conversions before higher tax rates returned. The lower rates provide certainty and open the door to long-term strategic tax planning.
Three Practical Strategies to Manage Taxable Income Effectively:
1. Roth Conversions Over Multiple Years
Spreading Roth IRA conversions evenly over several years can help retirees systematically shift assets from tax-deferred accounts to tax-free accounts while staying within lower marginal tax brackets. This approach avoids substantial tax hits in any single year.
Example: A retiree with a large traditional IRA could project their income over the next five years and schedule annual conversions, ensuring they stay within a favorable bracket.
2. Captial Gains Management

With the long-term capital gains rates fixed at 0%, 15%, or 20% depending on income levels, affluent investors should plan asset sales to optimize these tiers. For example, retirees can stagger the sale of appreciated securities to avoid getting pushed into the highest bracket unnecessarily.
Tip: Pair capital gains harvesting with charitable contributions to further off set taxable income.
3. Income Smoothing via Withdrawals and Deductions
Strategies like strategic timing of retirement account withdrawals can help manage annual income, ensuring retirees remain in their desired tax bracket. Retirees can also bundle deductions, such as charitable contributions, into alternating years to maximize the tax benefits.
Enhanced Senior Deduction with Income Limitations
From 2025 to 2028, the OBBBA provides a temporary senior tax deduction of up to $6,000 for individuals 65 and older ($12,000 for married couples). However, this deduction phases out once income exceeds $75,000 for individuals ($150,000 for couples) and vanishes entirely at $175,000($250,000 for couples).
While this deduction is a welcome benefit, affluent retirees must carefully balance income sources to ensure they qualify—or at least avoid crossing the thresholds unintentionally.
Maximizing the Senior Deduction:
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Deferring Income: If the year’s income looks likely to cross the phase-out threshold, consider deferring nonessential withdrawals from taxable accounts until the following tax year.
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Social Security Benefits Coordination: By strategically managing taxable income, retirees may also reduce or eliminate taxes on Social Security benefits. This works hand-in-hand with the senior deduction to cut overall tax liability.
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Leveraging Long-Term Income Opportunities
Income planning under the OBBBA isn’t just about minimizing taxes—it’s also about striving for financial security. Affluent retirees are uniquely situated to implement multi-year strategies for better cash flow through investments, philanthropy, and tax-conscious withdrawal plans.
Income Timing Tactics:
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Evenly distribute taxable income over several years to maintain access to deductions like the senior benefit.
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Use tax-loss harvesting in market downturns to offset realized capital gains.
Charitable Giving as a Dual Strategy:
Philanthropically inclined retirees can couple their income planning with charitable intent. Contributing appreciated securities to donor-advised funds (DAFs) not only provides immediate tax deductions but also reduces exposure to capital gains. If positioned strategically, it keeps income below deduction phase-out thresholds.
Clarity and Certainty Amid Complexity
For many affluent retirees, the OBBBA’s eff ort to make key tax policies permanent offers something rare in financial planning—predictability. Long-term rates and brackets allow for meticulous independent or advisor-assisted planning. However, the inclusion of temporary measures, like the senior deduction and the higher exemption limits for estate planning, requires careful navigation.
Setting the Stage for the Series
This article introduces some foundational strategies to make the most of the OBBBA from the perspective of income management and tax optimization. The next two articles in the series will explore additional areas of financial planning in depth:
1. Article 2 will focus on estate planning provisions under the bill, including changes to the estate tax exemption and strategies for intergenerational wealth transfer.
2. Article 3 will tackle healthcare cost management, Medicare tax implications, and evolving strategies related to retirement accounts.
By understanding and methodically applying the principles outlined here, retirees and pre-retiree scan gain confidence in their financial future. The OBBBA, while complex, offers substantial planning opportunities when approached with care and precision.
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If you’d like to discuss how the OBBBA affects your financial plans, our team is here to help customize strategies to your unique situation. 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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