In retirement, there are different challenges and opportunities than in the working years. Income decisions, healthcare choices, and tax planning interact in ways that can affect your retirement security. Recent tax laws have introduced new tax planning opportunities for retirees. However, they also increase the long‑term consequences of planning mistakes. This makes intentional, multi-year coordination more important in 2026.
Here are five planning priorities every retiree should consider.
1. Use the new senior deduction strategically
The One Big Beautiful Bill Act (OBBBA) introduced an enhanced tax deduction for retirees aged 65 and older. This deduction adds $6,000 ($12,000 for joint filers) to the standard deduction. However, this higher deduction is temporary- it only lasts until 2028. And the deduction phases out for high income taxpayers. The phaseout begins at $75,000 of income (Modified Adjusted Gross Income) for single filers and $150,000 for joint filers. It is fully eliminated at $175,000 for singles and $250,000 for married couples.
Used intentionally, this temporary deduction allows retirees to recognize additional taxable income without increasing their effective tax rate. This can lower the cost of tax planning strategies like Roth IRA conversions, capital gain harvesting, and “tax bracket filling” in retirement.
2. Reassess your RMD strategy
SECURE Act 2.0 increased the Required Minimum Distribution (RMD) age to 73 for individuals born between 1951 and 1959 and will increase to age 75 for those born in 1960 or later. While the delay reduces immediate pressure, it also can concentrate taxable income later in life if left unmanaged. This is a major cause of retirement tax surprises that can come from a spike in income once Required Minimum Distributions (RMDs) begin at age 73 or 75. We created a video which explains this topic in more detail.
Effective RMD planning helps reduce tax spikes later in retirement. By integrating asset location, Roth conversions, and intentional distribution sequencing, you can make a meaningful difference in your lifetime tax exposure.
3. Use HSAs as a retirement healthcare asset
Beginning in 2026, OBBBA expands HSA eligibility to millions more Americans. Contribution limits increase to $4,400 for individuals and $8,750 for families, with $1,000 catch-up contributions for those age 55 and older.
Health Savings Accounts (HSAs) are an underutilized tool in retiree tax planning. They offer a rare triple tax benefit: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. An HSA can be a long-term accumulation vehicle. Funds grow tax-free for years and can later be used in retirement to cover Medicare premiums, copays, deductibles, and other healthcare costs, helping to preserve other retirement funds that cost more in taxes to distribute.
4. Analyze Medicare choices and IRMAA exposure
Another big source of retirement tax surprises comes from Medicare income-related surcharges (IRMAA). Medicare IRMAA surcharges increase Part B and Part D premiums based on your income. In 2026, beneficiaries with income above $109,000 for single filers or $218,000 for joint filers face surcharges that push Part B premiums well above the base amount. The surcharges are tiered, with higher-income beneficiaries paying progressively more.
Because IRMAA thresholds are not doubled for surviving spouses, a widow can face the same or higher Medicare premiums on a single income that the couple previously paid together. Proactive income planning can help to reduce a survivor’s healthcare insurance cost by deliberately taking some income earlier in retirement so that the IRMAA-assessed income can be lower for a survivor later.
Coordination and Sound Decisions
Coordinating distributions, Medicare, HSAs, charitable strategies, and estate planning can affect not only your taxes, but your long-term flexibility. For more than 50 years, Blankinship & Foster has provided financial planning and investment management services to individuals and families. Our approach is designed to bring together multiple aspects of your financial situation in an organized and coordinated way. Rooted in your values, we guide you through evaluating alternatives so you can make confident decisions that serve your long-term plan. Schedule an introduction.
