Buried in the Bill: 5 Retirement Changes You Probably Missed

July 18, 2025

Every headline focused on what stayed the same: tax cuts made permanent.

But almost no one’s talking about the fine print—and that’s where the actual retirement impact is hiding.

Whether you're within five years of retirement or already drawing your FERS annuity and TSP income, these five changes could quietly affect your taxes, healthcare costs, and legacy planning—starting this year.

Let’s break it down:

1. The 12% and 22% Tax Brackets Are Now “Permanent”—But Watch the Hidden Cliffs

Yes, the TCJA-era brackets are sticking around.

But “permanent” doesn’t mean “protected.”

  • The income thresholds aren’t inflation-proofed forever.

  • Hidden traps like Medicare IRMAA, Net Investment Income Tax, and Social Security taxation are still very much alive.

👉 Why it matters for TSP withdrawals: You may feel safe staying under a certain bracket, but stealth taxes could still bite.

2. A New “Senior Bonus” Deduction—But It Phases Out Fast

A $6,000 standard deduction for taxpayers over 60 is a nice addition.

But there's a catch:

It starts phasing out once your Modified AGI crosses $118,000 (individual) or $236,000 (joint).

✅ Great if your income is modest.
⚠️ Dangerous if you’re doing Roth conversions or lump-sum TSP withdrawals.

3. IRA & Catch-Up Contributions Get an Upgrade

Starting in 2026, traditional and Roth IRAs will have higher catch-up limits, indexed for inflation.

This is great for:

  • Feds working past 62.

  • Retirees with earned income from consulting or reemployment.

But remember: more savings = bigger RMDs down the road. Plan distribution timing accordingly.

4. A Brand-New Tax Shelter for Grandparents: Youth Future Accounts

You can now fund a tax-free savings account for your children or grandchildren.

Think of it like a Roth IRA for minors—with no earned income requirement.

Perfect for:

  • Legacy planning

  • Reducing your taxable estate

  • Gifting without triggering annual exclusion limits

👉 Especially useful for CSRS or dual pensioners who don’t need all of their RMD income.

5. Medicare Premium Adjustments Are Quietly Baked In

Few are reporting this, but the bill adjusts IRMAA brackets starting in 2026.

That means even if your taxes stay flat, your healthcare costs could rise as thresholds shift.

Especially problematic for:

  • Dual-income FERS households

  • Retirees doing Roth conversions or working part-time

This bill doesn’t just extend the Trump tax cuts—it reshapes the rules for how federal retirees manage income, taxes, and healthcare exposure.

Now you can make smarter adjustments going forward.

Best,
—FWR