If you read our TCJA expiration article and spent months modeling tax increases that were supposed to hit in 2026, I have good news and bad news.

Good news: TCJA didn’t expire. Congress actually passed something. Tax rates are now permanent.

Bad news: Your retirement plan still needs a complete overhaul, just for different reasons.

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law. It permanently extended TCJA tax brackets, added a new $6,000 senior deduction, increased estate tax exemptions to $15M per person, and created a narrow 2025-2028 window for strategic Roth conversions before temporary provisions sunset.

Translation: If you’re not re-running your retirement numbers right now, you’re leaving money on the table. Potentially a lot of it.

What OBBBA Actually Did

OBBBA is reconciliation legislation packaged as a comprehensive tax overhaul. Here’s what matters for retirement planning:

Made Permanent: TCJA Tax Brackets

The seven-bracket structure from TCJA is now permanent law:

  • 10%: $0 - $23,850 (2026, MFJ, inflation-adjusted)
  • 12%: $23,850 - $96,950
  • 22%: $96,950 - $206,700
  • 24%: $206,700 - $394,600
  • 32%: $394,600 - $501,050
  • 35%: $501,050 - $751,600
  • 37%: $751,600+

What this means:

  • No more TCJA expiration panic
  • Tax planning horizon is now stable (finally)
  • But temporary OBBBA provisions create NEW deadlines (more on this below)

Made Permanent: Higher Standard Deduction

The doubled standard deduction from TCJA stays, with a 2025 boost:

  • 2025: $15,750 single / $31,500 married filing jointly
  • 2026+: Inflation-adjusted annually

Comparison to pre-TCJA:

  • Old standard deduction (2017): $6,500 / $13,000
  • New permanent deduction: $15,750 / $31,500
  • Increase: ~142% higher

Eliminated Permanently: Personal Exemptions

Pre-TCJA allowed $4,700 per person exemptions. TCJA suspended them through 2025. OBBBA eliminated them forever.

Net effect: Standard deduction increase more than compensated for lost exemptions for most households.

NEW: Senior Deduction ($6,000 for Age 65+)

Temporary provision (2025-2028 only):

  • Additional $6,000 deduction for taxpayers 65 or older
  • $12,000 for married couples if both are 65+
  • Phases out based on Modified AGI:
    • Single: Starts at $75,000, fully phased out at $175,000
    • Married: Starts at $150,000, fully phased out at $250,000

This is huge for retirees and creates strategic planning opportunities.

NEW: Estate Tax Exemption Increase

Permanent change starting 2026:

  • $15 million per person ($30M per married couple)
  • Indexed for inflation starting 2027
  • Previous TCJA level: ~$13.6M
  • Pre-TCJA level: ~$5.5M

Child Tax Credit Bump

  • 2025: $2,200 per child (up from $2,000)
  • 2026+: Inflation-adjusted annually
  • Less relevant for retirees unless raising grandchildren

Why This Changes Your Retirement Plan (Even If You Already Updated for TCJA)

Change 1: The Senior Deduction Creates a 2025-2028 Window

The $6,000 senior deduction is temporary (2025-2028). After 2028, it sunsets.

What this means:

If you’re 65+ and have MAGI under the phase-out thresholds, you get an additional $6,000-$12,000 off your taxable income through 2028. After that, it’s gone.

Strategic implications:

Option A: Take larger IRA withdrawals 2025-2028

  • Benefit from senior deduction while it exists
  • Reduce future RMDs
  • Stay under IRMAA thresholds

Option B: Maximize Roth conversions 2025-2028

  • Senior deduction offsets conversion income
  • Lock in tax-free growth before deduction expires
  • Manage IRMAA impacts strategically

Example scenario:

  • Married, both 65+, retired
  • 2026 income before conversions: $80,000
  • Senior deduction: $12,000
  • Standard deduction: $31,500
  • Total deductions: $43,500
  • Taxable income before conversions: $36,500

You could convert $60,000 from traditional IRA to Roth and stay in the 12% bracket (bracket tops out at $96,950).

Tax on conversion: ~$7,200 (12%)

Without the senior deduction, that same conversion would cost ~$8,640 (20% more expensive).

After 2028, that senior deduction disappears. The window is 2025-2028. That’s it.

Change 2: Permanent TCJA Brackets Make Long-Term Planning Viable

For years, we’ve been planning in 2-3 year windows because of TCJA sunset uncertainty. Now we can model 20-30 year retirement horizons with stable tax assumptions.

What changes:

Roth conversion strategies can now be multi-decade plans:

  • No more “convert everything by 2025” urgency
  • Spread conversions over many years to optimize brackets
  • Model lifetime tax bills with actual tax rates, not guesses

Withdrawal sequencing becomes predictable:

  • Know your actual tax brackets in retirement
  • Plan taxable/tax-deferred/Roth withdrawal order
  • Optimize IRMAA bracket management over decades

Estate planning clarity:

  • $15M exemption is permanent (with inflation adjustments)
  • No more “use it or lose it” panic for $7-13M estates
  • Can plan multi-generational tax strategies

Change 3: IRMAA Planning Just Got More Complex

Medicare IRMAA surcharges are based on MAGI from two years prior.

2027 IRMAA = 2025 MAGI 2028 IRMAA = 2026 MAGI

The senior deduction affects MAGI calculation, which affects IRMAA.

2026 IRMAA Brackets (Single / Married Filing Jointly):

  • Tier 1: $106,000 / $212,000 - Base premium
  • Tier 2: $133,000 / $266,000 - +$69.90/month
  • Tier 3: $167,000 / $334,000 - +$174.70/month
  • Tier 4: $200,000 / $400,000 - +$279.50/month
  • Tier 5: $500,000+ / $750,000+ - +$384.30/month

Example IRMAA planning with senior deduction:

Scenario: Married couple, both 67, on Medicare, planning 2026 Roth conversion

Without conversion:

  • Income: $120,000
  • Standard deduction: $31,500
  • Senior deduction: $12,000
  • MAGI: $76,500
  • IRMAA tier: Base (no surcharge)

With $140,000 Roth conversion:

  • Income: $260,000
  • Deductions: $43,500
  • MAGI: $216,500
  • Tax bracket: 24%
  • Tax on conversion: $24,600
  • 2028 IRMAA: Tier 2 (+$1,678/year)

Critical timing consideration:

  • Do conversions in 2025-2028 (senior deduction available)
  • But manage IRMAA impacts 2-3 years out
  • After 2028, senior deduction disappears, making conversions more expensive

Change 4: TSP to Roth TSP Conversions Now Allowed (2026+)

Starting January 1, 2026, federal employees and retirees can convert traditional TSP to Roth TSP.

Previous rule: Had to roll TSP to IRA, then convert to Roth IRA.

New rule: Direct in-plan conversion from traditional TSP to Roth TSP.

Why this matters:

  • Simpler process (one step instead of two)
  • Keeps money in TSP (lower fees than most IRAs)
  • Subject to same tax treatment as Roth IRA conversions

Strategic timing for federal retirees:

  • Use senior deduction 2026-2028 to reduce conversion tax
  • Convert while in low-income years (before Social Security, before RMDs)
  • Avoid IRMAA cliffs with strategic conversion amounts

Real-World Scenarios: How OBBBA Changes the Math

Scenario 1: The Early Retiree (Age 62, Pre-Medicare)

Situation:

  • Single, age 62, retired
  • Income: $40,000/year (taxable account withdrawals + small pension)
  • Traditional IRA balance: $800,000
  • Roth IRA balance: $100,000
  • Plans to take Social Security at 67
  • RMDs start at 75

Old strategy (pre-OBBBA): Convert aggressively before TCJA expires in 2025. Fill 12% and 22% brackets completely.

New strategy (post-OBBBA):

  1. 2025-2028: Wait until 65 to maximize conversions (need senior deduction)
  2. Age 65-67 (2028-2030): Convert $50,000-60,000/year
    • Senior deduction: $6,000
    • Standard deduction: $15,750
    • Total deductions: $21,750
    • Taxable income before conversions: $18,250
    • Convert ~$55,000 and stay in 12% bracket
    • Tax cost: ~$6,600/year
  3. Age 67-74: Convert $40,000-50,000/year after Social Security starts
  4. Age 75+: RMDs on remaining balance

Result:

  • Converts ~$400,000 of the $800,000 to Roth by age 75
  • Reduces future RMDs by 50%
  • Lifetime tax savings: ~$85,000 vs not converting
  • Critical: Senior deduction saves ~$1,200/year in conversion taxes (2028-2030 only)

Scenario 2: The Medicare Retiree (Age 68, Married)

Situation:

  • Married, both 68, on Medicare
  • Income: $95,000 (Social Security $45k, pension $50k)
  • Traditional IRA: $1.2M
  • Roth IRA: $200,000
  • RMDs start age 75 (both)

IRMAA consideration:

  • Current MAGI: $95,000 (well below $212,000 Tier 1 threshold)
  • Room for conversions without IRMAA impact

OBBBA strategy:

  1. 2026-2028: Aggressive conversions while senior deduction exists
    • Income: $95,000
    • Senior deduction: $12,000
    • Standard deduction: $31,500
    • Taxable income: $51,500
    • Convert $45,000/year, stay in 12% bracket
    • Tax cost: $5,400/year
    • MAGI stays under $140,000 (IRMAA Tier 2 starts at $212,000)
  2. 2029+: Slower conversions (senior deduction gone)
    • Convert $30,000/year
    • Tax cost: $6,600/year (22% higher without senior deduction)

Result:

  • Converts $135,000 in 2026-2028 (with senior deduction)
  • Converts $150,000 in 2029-2034 (without senior deduction)
  • Senior deduction saves $1,440/year (2026-2028 only)
  • Reduces RMDs from $86,000/year to $57,000/year at age 75
  • Avoids IRMAA surcharges throughout

Scenario 3: The High-Income Retiree (Above Senior Deduction Phase-Out)

Situation:

  • Married, both 66
  • Income: $280,000 (pensions, rental income, investments)
  • Traditional IRA: $2M
  • MAGI above senior deduction phase-out ($250,000)

OBBBA impact:

  • No benefit from senior deduction (fully phased out)
  • Permanent TCJA brackets help (24% instead of pre-TCJA 28%)
  • Estate tax exemption increase matters ($15M vs $13.6M)

Strategy:

  1. Focus on IRMAA management, not senior deduction
  2. Smaller Roth conversions to stay under IRMAA Tier 4 ($400,000)
  3. Consider estate planning with higher exemption
  4. Use QCDs (Qualified Charitable Distributions) at 70½ to reduce RMDs

The point: Not everyone benefits from OBBBA’s temporary provisions. High-income retirees benefit from permanent bracket structure but miss senior deduction.

The Critical 2025-2028 Roth Conversion Window

If you’re 65+ and planning Roth conversions, 2025-2028 is your sweet spot.

Here’s why:

Factor 1: Senior Deduction Available (2025-2028 Only)

$6,000-$12,000 additional deduction = lower taxes on same conversion amount

Math:

  • Convert $50,000 with senior deduction: Pay ~$6,000 (12% bracket)
  • Same conversion without deduction: Pay ~$7,200 (12% bracket on higher taxable income)
  • Savings: $1,200 per $50,000 converted

Over three years of conversions:

  • Convert $150,000 total
  • Save ~$3,600 in taxes vs converting after 2028

Factor 2: Permanent Brackets Known

You know tax rates for the next 30 years. You can model:

  • Exact tax cost of conversions now
  • Exact tax savings from Roth withdrawals later
  • Break-even timeline with confidence

Factor 3: IRMAA Two-Year Look-Back

Convert in 2026 → Affects 2028 IRMAA Convert in 2028 → Affects 2030 IRMAA

After 2028, senior deduction is gone, making conversions more expensive AND IRMAA management harder.

Factor 4: Time Before RMDs

RMDs start at 75 (for those born 1960+). Every year before 75 is a year to convert at lower brackets.

If you’re 65 in 2026:

  • You have 10 years before RMDs
  • 2026-2028 = 3 years with senior deduction
  • 2029-2035 = 7 years without senior deduction

Convert more in years 2026-2028 to minimize lifetime taxes.

What You Should Do Right Now (January 2026)

OBBBA is law. The clock is ticking on temporary provisions. Here’s your action plan:

Action 1: Re-Model Your Entire Retirement Plan

Update tax assumptions:

  • Permanent TCJA brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%)
  • Standard deduction: $31,500 MFJ (2026, inflation-adjusted after)
  • Senior deduction: $12,000 MFJ (2026-2028 only, phase-out rules)
  • No personal exemptions (permanent)

Run scenarios:

  • Baseline: No Roth conversions
  • Scenario A: Aggressive conversions 2026-2028 (maximize senior deduction)
  • Scenario B: Moderate conversions 2026-2035 (spread over 10 years)
  • Compare lifetime tax bills, RMD amounts, IRMAA impacts

Action 2: Calculate Your Senior Deduction Benefit (If 65+)

Step 1: Determine eligibility

  • Are you 65+ in 2026?
  • Is your MAGI under phase-out thresholds?
    • Single: $75,000-$175,000 (partial to full phase-out)
    • Married: $150,000-$250,000 (partial to full phase-out)

Step 2: Calculate benefit

  • Full deduction ($6,000 or $12,000): MAGI below phase-out start
  • Partial deduction: MAGI in phase-out range
  • No deduction: MAGI above phase-out end

Step 3: Model 2026-2028 vs 2029+ conversions

  • How much can you convert with the senior deduction?
  • What’s the tax savings vs converting after 2028?
  • Does it make sense to accelerate conversions to 2026-2028?

Action 3: Run IRMAA Impact Analysis

If you’re on Medicare or will be soon:

  1. Know the IRMAA brackets (2026 thresholds):
    • $212,000 (MFJ): Tier 1 starts
    • $266,000: Tier 2 (+$1,678/year)
    • $334,000: Tier 3 (+$4,192/year)
    • $400,000: Tier 4 (+$6,708/year)
  2. Calculate current MAGI
    • Where are you relative to IRMAA cliffs?
    • How much room for conversions?
  3. Model conversion scenarios with 2-year IRMAA lag
    • 2026 conversion → 2028 IRMAA
    • 2027 conversion → 2029 IRMAA
    • Find the sweet spot: maximize conversions, minimize IRMAA hits

Action 4: Optimize 2026-2028 Conversions

If senior deduction benefits you:

2026 conversion plan:

  1. Calculate total deductions:
    • Standard deduction: $31,500 (MFJ)
    • Senior deduction: $12,000 (if both 65+, under phase-out)
    • Total: $43,500
  2. Calculate conversion capacity:
    • Income before conversions: $___
    • Subtract deductions: $43,500
    • Taxable income: $___
    • Room to top of 12% bracket ($96,950): $___
    • Room to top of 22% bracket ($206,700): $___
  3. Convert the maximum amount that:
    • Stays in 12% or 22% bracket (your choice)
    • Doesn’t trigger IRMAA cliff (if on Medicare)
    • You can afford to pay taxes on without touching IRA

Repeat for 2027 and 2028.

Action 5: TSP to Roth TSP Conversion (Federal Employees/Retirees Only)

Starting January 1, 2026, you can convert traditional TSP to Roth TSP directly.

Strategy:

  1. Determine how much to convert (same math as IRA conversions)
  2. Time conversions to use senior deduction (2026-2028)
  3. Manage IRMAA impacts
  4. Execute conversions through TSP portal

Benefit over IRA rollover:

  • Keep money in TSP (lower fees: 0.042% vs typical IRA 0.25%+)
  • Simpler process (one step, not two)
  • TSP loan access remains (if under 59½)

Action 6: Review Estate Plan (High Net Worth)

If your estate is $10-30M:

OBBBA increased exemption to $15M per person ($30M per couple) permanently.

What this means:

  • Less urgency for complex trust structures
  • More flexibility in estate planning
  • Consider simplifying existing plans
  • Review beneficiary designations on IRAs/Roth IRAs

If you set up SLATs or GRATs in 2024-2025 to use “expiring” exemption:

  • Those are still valid
  • But exemption didn’t decrease (it increased)
  • Consult estate attorney about whether to unwind or keep

What Most Retirement Software Still Gets Wrong

Why does this keep happening? The TCJA→OBBBA transition just proved why hardcoded retirement calculators fail every time tax laws change. While most software became obsolete overnight, Fatboy users updated their tax parameters in 10 minutes and kept planning. Read the full story: Why Fatboy Financial Planner?

Consumer retirement calculators are updating slowly. Most still:

❌ Don’t include senior deduction

  • They’re modeling 2026+ with just the standard deduction
  • Missing $6,000-$12,000 in deductions for 65+ taxpayers
  • Your tax estimates are 10-20% too high for 2026-2028

❌ Don’t sunset senior deduction in 2029

  • Some tools added senior deduction but didn’t code the sunset
  • They show it continuing forever
  • Your tax estimates are 10-20% too LOW for 2029+

❌ Don’t model IRMAA cliffs accurately

  • IRMAA is complex (5+ tiers, income-based, 2-year lag)
  • Most tools ignore it or use simplified approximations
  • You might cross a cliff and not know until you get the bill

❌ Don’t optimize senior deduction window

  • They don’t suggest accelerating conversions to 2026-2028
  • They spread conversions evenly over 10+ years
  • You’re leaving money on the table

What you need instead:

Software that lets you:

  • Edit tax parameters by year (permanent vs temporary provisions)
  • Model senior deduction phase-outs based on your MAGI
  • Calculate IRMAA impacts with 2-year lag
  • Compare conversion timing strategies (2026-2028 vs 2029+)
  • See lifetime tax differences across scenarios

The Bottom Line

OBBBA changed everything:

✓ TCJA brackets are now permanent (no more sunset panic) ✓ Senior deduction creates a 2026-2028 conversion window (use it or lose it) ✓ Estate tax exemption increased to $15M (more planning flexibility) ✓ TSP to Roth TSP conversions now allowed (simpler for feds)

But the tax planning window is closing:

2026-2028: Senior deduction available (save 10-20% on conversion taxes) 2029+: Senior deduction gone (conversions more expensive)

If you’re 65+ and planning Roth conversions, the next 3 years matter more than any other period in retirement tax planning.

What to do:

  1. Re-model your retirement plan with OBBBA tax law
  2. Calculate senior deduction benefit (if 65+)
  3. Optimize 2026-2028 Roth conversions to maximize deduction
  4. Manage IRMAA cliffs with 2-year look-ahead
  5. Review estate plan with new $15M exemption

The old TCJA panic was about avoiding tax increases. The new OBBBA opportunity is about capturing temporary tax savings before they expire.

You have three years. Don’t waste them.

Want to model OBBBA senior deduction and Roth conversion optimization? Download Fatboy Financial Planner - updated for OBBBA tax law with senior deduction phase-outs, IRMAA cliff analysis, and 2026-2028 conversion window optimization.

Because planning without modeling the senior deduction sunset is leaving thousands of dollars on the table.

Questions about OBBBA retirement planning strategies? Email: fbfinancialplanner@gmail.com

Related reading:

Sources:

  • [One Big Beautiful Bill Act (OBBBA) Tax Impacts H&R Block](https://www.hrblock.com/tax-center/irs/tax-law-and-policy/one-big-beautiful-bill-taxes/)
  • [Big Beautiful Bill Explained: Tax Changes FAQ Tax Foundation](https://taxfoundation.org/research/all/federal/one-big-beautiful-bill-act-tax-changes/)
  • [2025-2026 Tax Season Guide to OBBBA Tax Law Changes CPA Practice Advisor](https://www.cpapracticeadvisor.com/2025/12/19/special-series-2026-tax-season-filing-guide-2025-big-beautiful-bill-tax-law-changes/165724/)
  • [Roth IRA Conversions Under the One Big Beautiful Bill Act for 2025 and 2026 Highland Financial Advisors](https://www.highlandplanning.com/learning-center-1/roth-ira-conversions-under-the-one-big-beautiful-bill-act-for-2025-and-2026)
  • With the Passage of OBBBA, Are Roth IRA Conversions Still Recommended for Federal Employees and Retirees?
  • [OBBB tax changes retirees shouldn’t overlook Wipfli](https://www.wipfli.com/insights/articles/pcs-obbb-tax-changes-retirees-shouldnt-overlook)
  • [3 Big Changes for Retirement Planning in 2026 Morningstar](https://www.morningstar.com/retirement/3-big-changes-retirement-planning-2026)