Tag: retirement planning

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The 10 Biggest Recent Tax Law Changes for High-Income Households

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In our previous articles, we have said that the One Big Beautiful Bill Act (OBBBA) represents one of the most significant tax law updates in years. While the legislation contains hundreds of provisions, several changes are particularly relevant for high-income households, including business owners and families with substantial estates.

Below are ten of the most important changes and the planning conversations they may trigger.

1. Greater Certainty for Long-Term Tax Planning

A major theme of OBBBA is permanency. Several provisions that were previously temporary have now been extended indefinitely. This includes:

  • pass-through deductions
  • estate tax exemptions
  • certain business deductions

Planning opportunity:

Greater certainty allows families and business owners to build long-term tax strategies with fewer sunset concerns.

2. TCJA individual tax rates made permanent

The Tax Cuts and Jobs Act (TCJA) passed in 2017 lowered top federal income tax rate to 37%. Instead of reverting to higher pre-2018 rates, the OBBBA makes it permanent, providing greater long-term planning certainty.

Planning opportunity:

Years with temporarily lower taxable income may still present opportunities to:

  • convert portions of traditional IRAs to Roth IRAs
  • reduce future required minimum distributions
  • leave tax-free assets to heirs

3. The 20% Pass-Through Income Deduction Is Now Permanent

The Internal Revenue Code Section 199A Qualified Business Income deduction allows many business owners to deduct up to 20% of pass-through income. Before OBBBA, this deduction was set to expire after 2025.

Planning opportunity:

Business owners may want to revisit –

  • S-corporation salary strategies
  • entity structure decisions
  • income timing strategies

4. Expanded Tax Benefits for Qualified Small Business Stock

The law enhances the tax advantages under Internal Revenue Code Section 1202 Qualified Small Business Stock (QSBS). Changes include:

  • Tiered capital gains exclusion
    • 50% exclusion after 3 years
    • 75% exclusion after 4 years
    • 100% exclusion after 5 years
  • Higher exclusion limit
    • Increased to $15 million
  • Expanded company eligibility
    • Asset threshold increased to $75 million

Planning opportunity:

For founders or investors expecting a business exit, entity structure and stock issuance timing may significantly affect future taxes.

5. Immediate Deduction of Domestic R&D Costs

The law restores immediate deductibility of domestic research and development expenses under Internal Revenue Code Section 174. This reverses the previous rule requiring five-year amortization.

Planning opportunity:

Technology firms, engineering companies, and innovation-driven businesses may benefit from improved cash flow and faster tax deductions.

6. More Favorable Interest Deduction Rules

Changes to Internal Revenue Code Section 163(j) increase the allowable deduction for business interest expenses. The formula once again resembles EBITDA rather than EBIT, allowing many leveraged businesses to deduct more interest.

Planning opportunity:

Real estate investors and private business owners may benefit from re-evaluating financing strategies.

7. Changes to Energy and Clean-Technology Credits

Several energy-related incentives are being phased out over the coming years. Credits affected include those related to:

  • electric vehicles
  • energy-efficient buildings
  • clean energy infrastructure

Planning opportunity:

Households and business owners planning energy projects may want to review timelines to capture remaining credits before phase-outs occur.

8. Higher Estate and Gift Tax Exemptions Made Permanent

One of the biggest changes affects estate planning. The law makes the historically high federal estate tax exemption permanent under Internal Revenue Code Section 2010. For 2025 and beyond:

  • Individuals can transfer roughly $15 million+ estate-tax-free
  • Married couples can transfer $30 million+

Without legislative action, the exemption was previously scheduled to drop roughly in half after 2025.

Planning opportunity:

Families may still benefit from strategies such as spousal lifetime access trusts (SLATs) or dynasty trusts to lock in exemption and protect assets from estate taxes in future generations.

9. Estate Planning Strategies Still Matter

Even with higher estate exemptions, many high-net-worth families still benefit from thoughtful planning using tools such as:

  • irrevocable trusts
  • dynasty trusts
  • lifetime gifting strategies
  • charitable planning

Planning opportunity:

Proper structuring can help families reduce estate taxes, protect assets, and preserve wealth across generations.

10. Expanded 529 Education Savings Plan Flexibility

Effective January 1, 2026, the federal 529 plan distribution limit for K–12 education doubles from $10,000 to $20,000 per beneficiary per year. Qualified withdrawals remain federal income tax-free. The $20,000 annual limit is per student (beneficiary), not per family. Also, the OBBBA significantly expanded the definition of qualified K–12 education expenses. In addition to private school tuition, qualifying expenses may now include:

  • Certain educational therapies and services for students with disabilities (subject to the statutory rules)
  • Tuition at public, private, or religious schools
  • Curriculum and instructional materials
  • Books
  • Online educational materials
  • Certain tutoring expenses
  • Fees for standardized tests
  • Dual-enrollment fees

Planning opportunity:

If you’re planning for private school, the combination of a 529 plan (up to $20,000/year of tax-free qualified withdrawals), and your state’s eligible education savings account could substantially reduce your family’s out-of-pocket education costs.

In summary, the One Big Beautiful Bill Act introduces significant tax changes affecting affluent households, and business owners. While many provisions provide new opportunities, their impact depends heavily on your:

  • income level
  • business structure
  • estate size
  • investment strategy

A coordinated approach between your financial professionals and attorneys can help ensure these changes are incorporated into your broader wealth plan.

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What Retirees Need to Know About the OBBBA

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The One Big Beautiful Bill Act (OBBBA) is one of the most significant tax law updates in recent years, and while much of the attention has focused on business owners and high-net-worth families, retirees are not exempt from its impact. Understanding how OBBBA affects retirement income, investments, charitable giving, and estate planning can help retirees maximize tax efficiency and protect wealth for themselves and their heirs. Below are key planning considerations retirees should keep in mind.

Side Businesses and the QBI Deduction

Many retirees supplement their retirement income with part-time businesses, consulting work, or rental properties. Under OBBBA, the 20% Qualified Business Income (QBI) deduction is now permanent, and it may apply to eligible pass-through income earned from these activities.

This means that if a retiree operates an S-corp, LLC, or partnership, or even manages certain rental properties that qualify as a trade or business, they could potentially deduct up to 20% of that income on their federal tax return.

Planning tip: Retirees should review their part-time business or rental activities to confirm they meet QBI eligibility. Structuring income, managing expenses, and timing distributions can help maximize the deduction and reduce taxable income in retirement.

Timing Retirement Account Withdrawals

OBBBA does not directly change retirement account rules, but the broader tax landscape makes strategic planning more important. Withdrawals from tax-deferred accounts such as traditional IRAs or 401(k)s are generally taxed as ordinary income. By coordinating withdrawals with income from other sources—including side business income, pensions, and Social Security—retirees can potentially:

  • Reduce overall tax liability
  • Preserve the QBI deduction on eligible business income
  • Avoid pushing themselves into higher tax brackets

Planning tip: Consider staggering withdrawals across multiple years, using Roth conversions strategically, or coordinating distributions with years of lower earned income to reduce taxes. Consulting a financial advisor can ensure that your withdrawal strategy aligns with both current needs and long-term legacy goals.

Health and Long-Term Care Planning

Medical and long-term care expenses could be prohibitively high for retirees. In fact, these costs are among the largest concerns for retirees. OBBBA does not change these rules directly, but retirees should consider integrating their healthcare planning with their overall estate and financial plan.

  • Review health insurance and long-term care funding options for coverage gaps
  • Consider trusts or other structures to protect assets from potential future healthcare costs
  • Coordinate distributions from retirement accounts and investments to cover anticipated medical expenses while maintaining tax efficiency

Planning tip: Properly structuring assets for healthcare and long-term care can help protect wealth while ensuring that funds are available when needed.

Estate and Inheritance Planning

OBBBA makes several estate-related provisions permanent, including historically high estate and gift tax exemptions. For 2025 and beyond, individuals can transfer roughly $15 million free of federal estate tax, and married couples can transfer $30 million.

Even with these high thresholds, careful planning is essential. Retirees should:

  • Confirm that their wills and trusts reflect current exemptions
  • Review ownership structures for real estate, business interests, and investment accounts
  • Ensure proper titling and beneficiary designations to avoid unintended tax consequences

Planning tip: Work with an estate attorney and a financial advisor to ensure that your estate plan is coordinated with current exemptions and your personal goals for family and heirs.

Charitable Giving Opportunities

Charitable giving continues to be a powerful tool for retirees to reduce taxable income while supporting causes they care about. OBBBA-related changes make it even more worthwhile to consider strategies like:

  • Qualified Charitable Distributions (QCDs): Retirees over 70½ can transfer up to $100,000 directly from an IRA to a qualified charity, satisfying required minimum distributions (RMDs) while avoiding additional taxable income.
  • Donor-Advised Funds (DAFs): Allow retirees to make a charitable contribution now, receive an immediate deduction, and recommend grants to charities over time.
  • Charitable Remainder Trusts (CRTs): Provide income streams to the donor while ultimately benefiting a charitable organization, reducing estate taxes and offering diversification of concentrated assets.

Planning tip: Review charitable strategies annually to coordinate donations with income timing and other deductions. Proper planning can help retirees maximize tax benefits and leave a legacy.

If you are a retiree, or are retiring soon, now is the time for you to review your income streams, charitable strategies, and estate plans in light of OBBBA’s permanent changes. By taking a proactive approach, it is possible to maximize tax efficiency, maintain financial flexibility and security, preserve more wealth for heirs while continuing your support for your charitable causes.

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Why the Financial Decisions You Make in Your 50s and Early 60s Matter More Than Any Other Time

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It is fair to say that in the minds of many in affluent households, retirement success is determined by market returns alone. This is not surprise given the fact that every day everywhere we are bombarded by news concerning the ups and downs of major stock market indexes. In reality, research after research shows that retirement success is determined by how taxes, RMDs, Social Security, and Medicare interact over time.

What’s more, the difference between proactive planning and “do nothing” defaults during your late 50s and early 60s routinely reaches $500,000–$1,500,000 in lifetime after-tax wealth for households with net worth ranging from $3 million to $8 million. There are numbers behind that statement.

Most pre-retirees’ households with net worth of $3 million to $8 million share a similar balance sheet like this:

Asset Type     Typical Allocation
Tax-deferred (401(k)/IRA)             45%–65%
Taxable brokerage             25%–40%
Roth             5%–15%
Home / Other    Excluded from income planning

This concentration in tax-deferred accounts is the root of most retirement tax problems. Let’s look at a hypothetical pre-retiree couple age 60 years old with a $3 million portfolio and $1.8 million in pre-tax accounts. Assume a 5% annual growth rate of their pre-tax portfolio, by the time they reach age of 73 when they start their first RMD (required minimum distribution) from their pre-tax retirement plan(s), their first RMD would be close to $98,000. Combined with Social Security, it is estimated that 85% of Social Security Benefits would be taxable, and they would pay higher Medicare premium. And their overall marginal tax rate would be pushed up to as high as 32%.

The conclusion: RMD planning is not optional.

One of the important financial decisions pre-retirees in their late 50s and early 60s must make is when to claim their Social Security benefits. For example, the claim timing for a married couple with net worth of $5 million and $3 million tax-deferred portfolio can mean a big difference in the range of approximately $450,000 to $600,000 in retirement income.

The conclusion: for affluent retirees, the timing of claiming Social Security benefits is often a tax and longevity hedge, not an income necessity.

As people gets older, healthcare expense gradually becomes their largest expense especially during their retirement. No planning or bad planning can significantly increase a retiree’s Medicare premium paid. For example, a married couple age 66 years old with a net worth of $8 million find out that Medicare premiums increase dramatically because their Modified AGI exceeds IRMAA thresholds due to a one-time Roth conversion at age 64. Depending on the amount of the conversion, their Medicare Part B + D surcharges could add up to $10,000 per year. Due to income stacking that persists for multiple years, their lifetime excess premium could top $120,000.

Conclusion: Medicare is not a healthcare decision—it’s a lifetime pricing contract.

Across households with net worth in the range of $3 million to $8 million, proactive planning during ages 55–65 typically delivers:

  • $250k–$600k in reduced lifetime taxes
  • $50k–$150k in avoided Medicare premiums
  • $300k–$800k in increased after-tax legacy value
  • Greater income stability in market downturns

Bottom line for high-net-worth pre-retirees: your mid-to-late 50s and early 60s are not just about investment performance – they are more about engineering outcomes. This is the final window where you can:

  •  Reshape future RMDs
  • Control tax brackets
  • Optimize Social Security
  • Lock in Medicare costs
  • Improve estate efficiency

Once RMDs and Medicare begin, most decisions become reactive.

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Why Your Income Tax May Rise in 2026

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If you’re over 50 and earn a higher income, a new IRS rule could quietly increase your tax bill starting in 2026 — even if you don’t change how much you save for retirement.

The change has to do with catch-up contributions to 401(k) plans and how they must be taxed going forward. Here’s what you need to know:

What’s Changing?

The IRS has finalized new rules under the SECURE 2.0 Act that affect how certain workers can make catch-up contributions to their 401(k) retirement plans.

Beginning in 2026:

  • If you are age 50 or older, and
  • You earned FICA-taxable wages exceeding $150,000 (indexed for inflation) in the preceding calendar year

Your catch-up contributions must be made as Roth contributions — meaning after-tax, not pre-tax money.

Why This Matters for Your Taxes

Before this rule, you could usually choose whether your catch-up contributions were:

  • Pre-tax (lowering your taxable income today), or
  • Roth (taxed now, but tax-free later)

Under the new rules, higher-income workers lose that choice. If you were previously making pre-tax catch-up contributions, your taxable income will now be higher — even though you’re saving the same amount. That’s why your tax bill may increase.

What If My 401(k) Plan Doesn’t Offer a Roth Option?

If your employer’s 401(k) plan does not allow Roth contributions, then highly paid employees cannot make any catch-up contributions at all — pre-tax or Roth.

The good news is that most plans already offer Roth options. In 2023, about 93% of 401(k) plans did, and employers can add Roth features if they don’t already have them.

When Does This Take Effect?

  • The rule generally applies to tax years beginning after December 31, 2026
  • Some government and union plans have delayed timelines
  • Employers may choose to implement the rule earlier

What Should You Do Now?

If this rule may affect you, it’s worth planning ahead:

  • Review how higher taxable income could affect your overall tax picture
  • Consider whether increasing Roth savings earlier makes sense
  • Coordinate retirement contributions with broader tax planning

All in all, this change doesn’t mean Roth savings are bad — but it does remove flexibility for higher-income workers. Understanding the rule now gives you time to plan, adjust, and avoid surprises when 2026 arrives.

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Generation Y Should Prioritize Planning Now, Not Later

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Generation Y, also known as Millennials, refers to the demographic cohort born between 1981 and 1996. As we usher in the year 2026, the youngest Millennials will be turning age 30, and the oldest ones will be 45.

As Confucius, the great Chinese scholar and philosopher famously said over 2000 years ago, ‘at twenty, one comes of age; at thirty, one establishes oneself; at forty, one is free from doubts,’ the Millennials indeed are either establishing themselves professionally or raising a family of their own, or doing both at the same time. If you are one of this cohort, financial planning might feel like something for “later” — after the student loans are paid, after the house is bought, after the kids are launched. But for Millennials, delaying serious financial planning can mean missing out on opportunities new year brings that compound with time to build real security and freedom.

According to a Bankrate report, around 68% of Millennial and Generation Z student loan borrowers have delayed major financial milestones – like saving for retirement, buying a home, or paying off debt. What this means is that serious financial planning is more important now than later for Millennial because if you’re putting off saving and investing for your financial goals for another year, you’re paying a price in lost time and potential returns. For example, even though Millennials have saved more than Gen Z so far, their retirement balances still lag behind older generations. What’s more, Millennials aren’t just “behind”; they’re navigating a different landscape:

higher student loan debt, rising housing costs, heavier reliance on self-funded retirement, more job switching and gig-based income, and longer expected lifespans – money must last longer.

Many Millennials have a few common financial goals such as buy a home, save for college or childcare, and achieve financial independence. Financial planning helps you map goals to action — rather than guesswork or hope. Financial planning also helps turn uncertainty into structure. Here’s what a simple annual plan might include:

  • A monthly budget with debt payoff and savings targets
  • An emergency fund goal (e.g., 3–6 months of expenses)
  • Retirement contributions and investing (e.g., 10–15% of income)
  • A plan for short-term goals (e.g., house down payment)
  • An education savings plan (e.g., 529 plan)
  • Periodic check-ins and adjustments

Financial planning isn’t about perfection. It’s about progress. The more you delay on planning, the more uncertain your financial future will be — so start taking actions now. Here are some simple yet effective tips for getting started today: 

  • Build a Budget: Know exactly what’s coming in and going out.
  • Create an Emergency Fund: Even small monthly contributions grow over time.
  • Start Retirement Savings: Use employer plans (401(k)/IRA) — even 5% of income helps.
  • Plan for Debt Repayment: Target high-interest debt first.
  • Consider a Financial Advisor: A professional can help build a tailored plan.

It’s true that Millennials face a different financial landscape than past generations — but they also have time on their side, and the time is now for Millennials to get serious about planning for a more secured future for themselves and their family. 

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The Social Security and Medicare Consequences of “Un-Retirement”

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While you may hear the “softening” of US job market, one study found that as many as 1 in 8 retirees between ages 65 and 85 plan to return to work during 2025. Some in the media call this trend “un-retirement.”

The reason behind “un-retirement” is diverse. Some do so because they worry about outliving their money; others are simply bored during retirement and want the structure and social network of the workplace.

If you are a retiree and think about reentering work force, you need to be aware that earning money again after retirement can have consequences on your Social Security and Medicare Benefits.

For example, if a retiree is receiving Social Benefits before full-retirement age, and he starts working again, his Social Security benefits are reduced by $1 for every $2 of his income that exceeds $23,400 in 2025. In the year he reaches full retirement age, the reduction to his benefits is $1 for every $3 of the income that exceeds $62,160. However, in the month that he reaches full retirement age, the reduction stops. 

When the income a person earns combined with his other income exceed certain thresholds, he can be subject to increased Medicare premiums as well. 

Reentering workforce after retirement is a big decision. If, for whatever reason, you are thinking about “un-retiring”, it is crucial for you to weigh the pros and cons of doing so before making such a decision.

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Thinking about Retiring in 5 or 10 Years? What You Need to Know Now

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If you are 55 and older you probably start thinking about your retirement a bit more seriously now than before. You may even have set a date when you leave your work behind once and for all. Because you have saved and invested diligently your whole life, and you will retire when you have planned for.

In reality though, studies from 2024 to 2025 show that roughly only 3 out of 10 working Americans actually retire according to their planned retirement age, the other 7 are forced to retire early due to health reasons or company-related issues, or are still working in their 70s or even 80s due to insufficient funds, and may never be able to retire.

When things are going well, we tend to think that they will always stay that way. But many life changing events happened when you least expect them, disrupting your plan. Can you say, at this moment, with confidence that if you have to retire tomorrow, you have sufficient funds to support your preferred life style for 30, possibly 40 years?

If you are an investor, you have probably read in the news that lately S&P 500 stock index keeps reaching new record highs. Does this mean that US stock market has reached “bubble” level? There is some consensus among investment professionals that the current US stock market is richly valued according to historical standards. If you recall, we had a so called “dot com” bubble in early 2000. When that “bubble” busted, from peak to bottom, the market actually went down 49% and the correction lasted 56 months. For investors at that time, especially those who were either retired or living off of their portfolios, it was tough time trying to determine how long the downturn would last or how deep it would go. People who had, at one time, $1 million suddenly saw half of that amount on their brokerage statements. It was a scary time, especially if you were a retiree and taking income from your portfolio. Could it happen again? I think we all know the answer is “yes, it could happen again; the question is, “When?” What if you are forced to retire at a market high and subsequently comes a correction, are your assets well positioned to withstand a market correction?

While media and ads implant in our brain the images of silver-haired retirees traveling around the world, trips to the emergency rooms are far more prevalent as people age. Financial professionals see first-hand many aging retirees face the harsh reality of financial stress on how to afford the care they need. For example, in 2025 the average annual cost of a nursing home room ranges from $80,000 to over $100,000 in Dallas-Fort Worth metro area. Besides cost, when dressing or bathing become difficult for you, or driving becomes dangerous, have you thought about who will step in to take care of you, or make crucial medical treatment decisions if you are unable to? What about if you and your spouse both need such care?

These are some of the key questions people age 50 and older should ask themselves about. When financial markets are doing well like now, complacency tends to brew. Don’t let the complacency ruin your dream retirement.

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Why Women Need to Pay More Attention to Social Security Benefits

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Why do women need to pay more attention to social security benefits? Let’s look at a set of data*:

 • Most social security recipients are women: 54% of women between the ages of 60 and 79; 67% of women over the age of 90

• Social security benefits have saved 9.4 million women from living below the poverty line

• 44% of retired women get 50% or more of their income from social security benefits

One obstacle that prevents women from maximizing their social security benefits is that the rules for applying for social security are complicated and constantly evolving. For example, at the end of last year, Congress introduced a major social security benefit update bill. This bill is called the Social Security Fairness Act. This bill abolished a previous provision: Government Pension Offset for Social Security. The pension offset rule reduced Social Security benefits for people who received pensions from jobs that didn’t pay Social Security taxes. Before the passage of Social Security Fairness Act teachers and public employees who received their public employee pensions were basically unable to receive part or all of the Social Security spousal benefits. After the new law is implemented, if the spouses of teachers and government employees are eligible for social security benefits, then they can also apply for spousal benefits.

Like the US tax law, the laws that govern Social Security is one of the most complicated. You need to keep an eye on the latest developments and update your knowledge. Women who want to learn more about social security benefits can visit the official website of the US Social Security Administration: www.ssa.gov. If the complexity of Social Security rules makes you feel overwhelmed, you can also seek help from a financial advisor. Any financial advisor you trust can help you calculate the benefit amounts for you and your spouse as well as the best timing to collect them.

We all know some of the challenges women face in personal finance: for example, women tend to live longer, and their careers are sometimes interrupted by childbirth and/or other care-giving obligations, resulting in less social security benefits in the end. Even if you are a high-net-worth woman, how to maximize a stable source of income – social security benefits, is the kind of financial knowledge that women, especially those over 50 years old, need to know.

*Data credit: Marcial Mantell

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Empowering Futures: The Vitality of Planning Now for Generation X

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Millennials and Baby boomers tend to get a lot of media attention, whether it’s good or bad. Generation X, not so much. As we enter the year 2025, the oldest members of Generation X are turning 60 this year, while the youngest members are now in their mid-40s. Gen Xers, as they are often called, are in their prime earning years, but at the same time, they need to balance various financial obligations, such as paying for their kids’ education, caring for aging parents, paying down debts while trying to save and invest for their own retirement.

While most Gen Xers are aware of the basics of retirement planning, such as the importance of saving and investing for the future, yet many Gen Xers are lagging behind when it comes to retirement readiness. For example, many people underestimate the amount of savings they will need to fund their retirement. A general rule of thumb is to aim for a retirement income that is 70-80% of your pre-retirement income. However, the actual amount you will need will depend on your individual circumstances.

Besides saving and investing, there are many lesser-known retirement facts that Gen Xers are not aware of that can have a big impact on their financial security in retirement. For instance, retirement could last longer than many think. People are living longer than ever before, which means that retirement could last as long as 35 to 40 years. As a result, many Gen Xers underestimate the cost of healthcare in retirement. In reality, healthcare costs can be a major expense with long-term care costs especially being a significant one in retirement. According to the U.S. Department of Health and Human Services, the average cost of a semi-private room in a nursing home is $7,756 per month.

Another retirement facts that many Gen Xers don’t know is that Social Security benefits may be reduced if you work in retirement. If you claim Social Security benefits before your full retirement age and continue to work, your benefits may be reduced. Depending on your income, up to 85% of your Social Security benefits may be taxable.

Retirement planning is a complex and ever-changing process. From planning for healthcare costs to factoring in inflation and understanding the tax implications of your retirement income, there are many factors to consider when planning for retirement. Numerous surveys revealed that one of the biggest regrets of people who have already retired is not saving and planning for retirement earlier. Today, whether you are 40 or 60, it’s never too early or too late to plan for your future. But it’s vital that you take action. The action, or inaction, you take now could be the difference between a secure and comfortable retirement, and one that running out of money before you run out of time.