As advisors, our role is about much more than picking investments. It’s about helping clients make smarter, forward-looking decisions, particularly around taxes. That’s always been true, but the One Big Beautiful Bill Act of 2025 (OBBBA) raised the stakes.

OBBBA locked in today’s brackets with a few adjustments, created a new senior deduction, expanded the standard deduction, modified itemized deductions including the SALT cap. On the surface, those changes look like tax relief, but phaseouts of several major provisions create new distortions. The real story is how the changes together affect the marginal rate clients pay on the next dollar of income. That’s why the Effective Marginal Rate (EMR) approach has become an even more critical planning tool.

Why the Effective Marginal Rate Matters

The EMR method asks: What will the next dollar of income be taxed at?

With OBBBA’s permanent brackets and new phaseouts, that answer isn’t always intuitive. For example:

  • A client may appear to be in the 22% bracket but is effectively paying 55%+ on additional income once you account for the inclusion of Social Security benefits and the phaseout of the new senior deduction

  • IRMAA surcharges for Medicare Part B and D still stack on top, creating cliffs that OBBBA did nothing to address.

Understanding the Effective Marginal Rate is how we help clients avoid traps and seize opportunities in the new law.

Start With What You Can’t Control

The foundation hasn’t changed: we start with uncontrollable income — Social Security, pensions, and annuities. These sources set the floor for income. What OBBBA did change, however, is the interaction of these income streams with deductions and phaseouts.

Advisor Tip: Tools like Income InSight® allow you to visualize these guaranteed streams and then overlay the new OBBBA rules, giving clients a clear view of how today’s decisions ripple across their retirement.

Layering Withdrawals Strategically

Once the baseline is in place, we layer withdrawals from taxable, tax-deferred, and Roth accounts. The OBBBA changes to deductions mean that sequencing matters more than ever. In some cases, realizing income early under today’s “permanent” brackets makes sense. In others, holding off avoids losing out on deductions as they phase out with higher AGI.

The goal: smooth lifetime taxes based on an evaluation of each dollar of additional income, not just the overall effective tax rate. Doing so reduces lifetime tax liability, and determines whether or not a dollar of "undesirable" income due to its associated tax liability is worth taking in exchange for access to a larger pool of "desirable" dollars.  

Roth Conversions: Still a Tool, Not a Rule

OBBBA didn’t change the value of Roth conversions — but it did change the way we need to frame them. With “permanent” brackets, the urgency has shifted from “do it before rates go up” to “do it when EMR is favorable.”

That means utilizing lower tax rates on each possible dollar, especially before IRMAA or deduction phaseouts kick in. But remember, conversions aren’t always the right answer. Sometimes preserving Roth balances is more valuable when a client’s EMR is already high.

Planning Opportunity: With Tax Clarity®, you can visually show clients the new phaseouts in addition to all the interactions present in prior law. That clarity turns Roth conversion conversations from abstract to concrete.

Test, Measure, Adjust

If OBBBA taught us anything, it’s that “permanent” doesn’t always mean permanent. Laws can and will change again. That’s why EMR planning must remain a process, not a one-time decision. Advisors who build that into their practice will be the ones clients trust most when the next big change happens.  

Key Considerations Under OBBBA

  • Withdrawal sequencing is more nuanced — the senior deduction and expanded standard deduction can alter the usual order.

  • Don’t ignore add-ons — IRMAA, capital gains brackets, and NIIT still apply, and OBBBA didn’t simplify them.

  • Stay proactive — clients expect you to adapt their plan, not react after the fact.

Your Next Move

OBBBA didn’t simplify retirement tax planning, it made it more complex. But complexity creates opportunity for advisors who can demonstrate real value.

When you use the Effective Marginal Rate approach, you’re not just optimizing taxes in a single year. You’re helping clients extend portfolio longevity, minimize lifetime taxes, and even increase what they can pass on to heirs — all while navigating the new rules under OBBBA. That kind of clarity isn’t just advice; it’s peace of mind.

At the end of the day, retirement planning is about creating flexibility and confidence. With OBBBA now the law, EMR-based planning is one of the most effective ways to deliver both.

Want to dig deeper? Watch our OBBBA Bite-Sized Insights series on the Covisum Resources page.

Or, join us in Kansas City at Covisum MEET, September 24–26, to connect with peers and explore how to put these strategies to work in your practice. Learn more and register.