by KaNeil Menlove, VP Operations
A Personal Note
Hello again, Paragon family! I’m thrilled to be writing for our newsletter after what feels like the quickest twelve months on record. Over the past year I’ve met with many of you—whether in person, over Zoom, or on the phone—and one theme has come up time and again: How do we stay ahead of the constant policy changes in Washington? With a major piece of legislation now passed—the One Big Beautiful Bill Act—now is a perfect time to revisit that question.
A Fresh Tax Break for Retirees
Beginning in 2025, retirees will receive a new $6,000 standard deduction ($12,000 for married couples filing jointly), in addition to the standard deduction already in place. This additional deduction, which is set to expire in 2028, is intended to provide meaningful relief to seniors, particularly those relying heavily on fixed income sources. For many households, this will significantly reduce or even eliminate federal income taxes on Social Security benefits.
This change opens up opportunities to revisit tax strategies. With a larger deduction available, some retirees may benefit from increasing distributions from pre-tax accounts, such as IRAs or 401(k)s, without pushing themselves into a higher tax bracket. Others may want to consider Roth conversions, especially while rates are relatively low and these deductions remain in place.
If you haven’t already, we recommend sitting down with us to review your income plan. Together, we can ensure you’re optimizing withdrawals in a way that minimizes your lifetime tax burden.
Medicare and Medicaid: The Other Side of the Coin
While the tax break offers good news, the bill also contains provisions that are less favorable. Specifically, it includes automatic reductions in Medicare and Medicaid spending due to Pay-As-You-Go (PAYGO) enforcement rules. A 4% reduction in Medicare spending is scheduled to begin in 2026. Though the specifics remain to be seen, this could mean reduced reimbursement rates, fewer covered services, or higher out-of-pocket costs for retirees.
Medicaid is also facing substantial funding cuts, exceeding $600 billion. In addition, stricter eligibility requirements—including work mandates for some groups—could make access more difficult for those who depend on it. For retirees relying on Medicaid-supported long-term care or other healthcare services, these changes could introduce new financial challenges.
Now more than ever, it’s critical to build flexibility into your healthcare planning. Reviewing your Medicare supplement options, estimating long-term care costs, and considering a larger healthcare cushion in your financial plan can help protect you from uncertainty.
Social Security: Still Under Pressure
The latest 2025 Trustees Report projects that the Social Security trust fund will be depleted by 2033. Without new legislation, this would result in an automatic 23% cut in benefits. While we expect lawmakers to address this before then, the possibility of future reductions should be part of every retiree’s planning conversation.
It’s worth noting that fear of future cuts has already influenced behavior—more retirees are claiming benefits early. But doing so locks in lower monthly benefits for life and, if cuts do occur, could compound the financial hit. For those in good health and with other income sources, delaying benefits to full retirement age or age 70 can significantly increase total lifetime income.
We can help you model your retirement plan under various Social Security scenarios. Knowing how your finances would look with reduced benefits can provide peace of mind and highlight areas where small adjustments today can make a big difference tomorrow.
How We’re Supporting You Through These Changes
Our job at Paragon is to help you stay ahead of these developments. We’re already incorporating the new tax law into withdrawal strategies, evaluating the impact of healthcare spending cuts on long-term planning, and monitoring legislative changes to Social Security. We’re also reviewing Roth conversion opportunities and tax-efficient investment allocations for each client.
If you haven’t had your annual review yet, now is an ideal time to schedule one. These changes have ripple effects that touch nearly every part of a retirement plan, and we want to ensure you’re in the best position possible.
Market and Investment Implications
Though the One Big Beautiful Bill doesn’t change investment rules directly, it could influence market conditions. The tax cuts, for example, may stimulate consumer spending and corporate earnings, offering short-term support for equity markets. On the other hand, larger federal deficits could place upward pressure on interest rates or inflation, which might affect bond markets and long-term growth expectations.
For those in or near retirement, this underscores the importance of diversified, purpose-driven portfolios. We continue to emphasize a thoughtful mix of growth, income, and inflation protection, customized to each client’s risk tolerance and income needs. If you have questions about how your portfolio may respond to these shifts, we’re happy to walk through it with you.
Final Thoughts
Big legislation like the One Big Beautiful Bill always creates ripple effects. Some bring opportunity, like the expanded senior tax deduction. Others bring challenges, like looming Medicare and Social Security funding pressures. But with careful planning, your financial strategy can remain strong, resilient, and aligned with your goals.