In this post of our Big Beautiful Bill series, we turn our attention to two programs that form the foundation of most retirees’ financial plans: Social Security and Medicare.
While the One Big Beautiful Bill (OBBB) doesn’t directly change how these benefits are paid or calculated, it could significantly affect how much you pay in taxes on those benefits—or for them. Especially if you live in Massachusetts or the Boston area, where high property values and retirement savings can quickly bump income higher than expected.
What’s the Backdrop?
Before the proposed bill, many retirees faced taxes on their Social Security benefits and rising premiums on Medicare Part B and D due to their income levels. These taxes and surcharges are based on Modified Adjusted Gross Income (MAGI).
Here’s how it worked:
- Social Security Taxation: Up to 85% of your benefits could be taxable if your MAGI exceeded $44,000 (joint) or $34,000 (single).
- Medicare IRMAA Surcharges: If your MAGI exceeded $194,000 (joint) or $97,000 (single) in 2024, you paid higher monthly premiums.
- Importantly, these thresholds were never inflation-adjusted—pulling more retirees into tax exposure over time.
What the Big Beautiful Bill Changes
The new bill proposes a more generous senior deduction (up to $6,000 per person age 65+), which could reduce taxable income for many retirees. This may help some people drop below the thresholds that trigger Social Security taxation or IRMAA surcharges—at least temporarily.
But the bill also includes:
- Bracket compression: meaning retirees could hit higher marginal tax rates at lower incomes.
- Potential capital gains treatment changes: which could raise MAGI unexpectedly when retirees sell appreciated investments.
That means even though there’s a new deduction, your income planning still matters more than ever.
Examples: How This Could Play Out
- David and Susan, age 68, live in Newton, MA
- They take $60,000 from IRA withdrawals, $40,000 in Social Security, and another $10,000 in dividends.
- Under the new senior deduction, their AGI drops slightly—but not enough to avoid 85% of their Social Security being taxable. Their total MAGI keeps them above the IRMAA threshold.
- With some planning (e.g., smaller IRA withdrawals and larger Roth withdrawals), they could stay below the threshold and save $200+ per month on Medicare premiums.
- Linda, 66, lives in Jamaica Plain and just retired
- She’s considering a Roth conversion this year before RMDs begin.
- Without planning, a $60,000 conversion could spike her MAGI, increasing Medicare premiums for two years.
- With advice, she instead converts $30,000 this year and another $30,000 next year, staying under IRMAA and spreading tax cost more efficiently.
What Retirees in Massachusetts Should Know
Massachusetts does not tax Social Security income, and it does not add surcharges to Medicare premiums—but the federal effects still apply. That means:
- Income planning is key—even in a high-tax state like MA.
- Using Roth withdrawals or HSA funds instead of IRA withdrawals can help keep MAGI lower.
- Strategic giving through QCDs also lowers MAGI for Medicare and Social Security tax thresholds.
With high property values and large pre-tax retirement balances common among Boston-area retirees, these thresholds sneak up faster than most people expect.
What You Can Do Now
- Check your projected MAGI for 2025
- Tools like Holistiplan can forecast this using the new deduction.
- Map out your withdrawals
- Coordinate between IRAs, Roths, brokerage accounts, and HSA distributions.
- Watch the timing of big events
- Roth conversions, asset sales, or even large RMDs can cause IRMAA spikes.
- Pair tax planning with income planning
- Your income strategy affects more than just your tax return—it impacts how much of your Social Security is taxed and what you pay for Medicare.
Coming Up Next
In our final post, we’ll tie everything together with a few real-world retiree profiles—and explore how different strategies play out under the new rules.
Have questions about how income planning affects your retirement benefits? Let’s schedule a personalized review.
Evergreen Wealth Management provides flat-fee financial planning and investment management to individuals and families preparing for or living in retirement. Based in the Boston area, we specialize in helping clients create tax-efficient retirement income strategies that support the life they want to live.
The information contained herein is for educational purposes only and should not be construed as specific tax, legal, or investment advice. You should consult with a qualified tax professional or financial advisor before making decisions based on the content of this article. Evergreen Wealth Management is not a tax advisor or legal firm. All examples are hypothetical and intended for illustrative purposes only.