Tax Planning for Illinois Retirees and Pre-Retirees: Navigating the One Big Beautiful Bill

At Bluestem Financial Advisors, we believe that proactive planning starts with staying informed. Our commitment to clients goes beyond investment advice. We monitor tax and related legislative changes to help you understand what new laws and regulations mean for your financial life. Recently, we had the opportunity to share an overview of the most recent tax bill, the One Big Beautiful Bill Act (OBBA), with members of the State Universities Annuitants Association (SUAA). Here is a summary of what we covered, including key strategies and planning opportunities for retirees and pre-retires.

Overview of Tax Legislation Since 2017

We began with a broad overview of tax law changes since 2017, including the Tax Cuts and Jobs Act (TCJA) and the significant overhauls brought by the SECURE Act. These changes have shaped the retirement landscape, especially regarding how retirement accounts are treated after the owner’s death. The SECURE Act, for example, eliminated the “stretch IRA” for many non-spouse beneficiaries, requiring faster distributions and potentially higher taxes for heirs.

The OBBA: What’s New and What’s Extended

The One Big Beautiful Bill Act (OBBA) primarily extends the lower tax rates and higher standard deductions introduced by the TCJA, with new inflation adjustments. For retirees, the new “enhanced senior deduction” offers an additional $6,000 per person age 65+, though it phases out at higher incomes and is set to expire after 2028. We discussed how these provisions can impact your annual tax bill and why it’s important to review your filing strategy each year.

State and Local Tax (SALT) Deduction – Especially for Illinois Residents

The increased cap up to $40,000 on state and local tax (SALT) deductions can be a game-changer. We highlighted how this opens the door for “bunching” strategies: by timing property tax and charitable payments, you can maximize deductions in alternating years. This is especially relevant in Illinois and other states where property taxes and state income taxes are significant.

Charitable Giving Opportunities

We explored several ways to make your charitable giving more tax-efficient:

• Above-the-line charitable deduction (starting in 2026) for those who don’t itemize.

• Qualified Charitable Distributions (QCDs) from IRAs for those age 70½+, which can reduce taxable income, lower Medicare premiums, and help maintain eligibility for senior deductions.

• Why QCDs remain a powerful tool even as other charitable deduction rules change.

Roth Conversions: Leveraging Lower Tax Brackets

We highlighted how to utilize lower tax brackets before and early in retirement to avoid higher taxes later. By converting traditional retirement assets to Roth IRAs during lower-income years before Social Security and Required Minimum Distributions (RMDs) begin you can reduce future tax burdens and gain more flexibility in retirement income planning.

Social Security: An Overview and Impacts to Retirees

We provided an overview of recent Social Security changes, including the repeal of the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). These changes mean higher Social Security benefits for many SURS retirees but also create new planning considerations. We cautioned those who receive retroactive payments that could affect their tax bracket or Medicare premiums.

Watch the full webinar for detailed examples and Q&A:

At Bluestem, we see a tremendous opportunity to integrate tax planning into our retirement and planning strategies. By staying ahead of legislative changes and thoughtfully coordinating your tax, investment, and income decisions, we help you maximize your resources and adapt your plan as your life evolves.

If you’re interested in a more integrated approach to tax and retirement planning, we invite you to schedule a conversation with our team. Let’s work together to build a strategy that’s as dynamic as your life.

Tip of the Month: Know Your Bluestem Team

As our team grows and folks take on new roles within the firm, we decided it was a good time to reintroduce ourselves and what do here (also thank you to a client who suggested this idea). Everyone was asked to share what they do in their own words. Here we are in photo order, from left to right.

Tim Lee

I am one of the advisors on the team. I put together financial plans for our clients, lead client meetings to set goals and keep their plan on track and support other advisors in their meetings. In addition, I put together numbers behind the scenes which include portfolio analysis and tax planning. Outside of client-specific work, I contribute to our marketing team and have co-written our previous blog series on the SURS RSP.

Rachel Tyson

I am a friendly, helpful, back-office gremlin. Following the instructions provided by advisors, I place trades and transfer cash. I help clients place trades in their workplace retirement accounts, open non-Schwab accounts, and roll over their workplace retirement plans when they switch jobs or retire. I create paperwork (sometimes lots of it) for clients to sign. I build and create workflows in our software to ensure that the plans you discuss with your advisor are implemented and verified. Occasionally I come out from my cubicle and interact directly with clients. I’m looking forward to doing more of that now that I’m living in Champaign again.  My one sentence summary: I’m here to help implement the financial plan you discussed with your advisor as smoothly as possible.

Josh Cutler

I wear lots of "hats" at Bluestem! In my role as a Senior Advisor, I have two key responsibilities. First, for leading the planning work for clients, helping them to align money with meaning and purpose while ensuring that all the tactical to dos are also taken care of throughout the year. Second, I serve as a mentor and partner to Rodney and Tim to provide them with whatever support they need to be successful in their roles as advisors; together, the three of us operate as an advisory team, serving clients and supporting each other. Another hat that I wear is Director of Human Capital, a leadership role that puts me in charge of employee recruitment, hiring, training, and development systems and processes. I oversee our compensation and benefits plan and ensure our team loves their work and is balancing their work life with their home life. My final hat is the Integrator of Bluestem. In this role, I, alongside Jake, am setting the strategic direction of our firm, making sure we have a strong and intentional culture, and ensuring that there is accountability for all of us to be held to the highest professional standards. While I wear many hats, my overall focus is to support the success of others around me, whether it be clients, the Bluestem team, or local or industry partners. What a way to get to spend your "working" hours!

Rodney Camper

Simply put, my job as an advisor is to know you. Who are you? What values drive you? What's important to you? What fills up your cup? Where do you want to be? What kind of life do you want to live? All the financial planning knowledge in the world means nothing if it doesn't connect with you and further your hopes for life. Practically speaking, I take my financial planning knowledge and use it to find efficiencies, strengths, or weaknesses and I run it through a filter of who you are and where you want to be in order to make sound decisions. 

Just as an example - say someone is far ahead of retirement savings goals. At face value, the financial math implies that the person could spend more money in retirement, but what if they already live comfortably? What if I knew them more personally and understood they were feeling burnt out at work (and could afford a lower paying career path) or that they've always wanted to travel the world while health allows (and could retire earlier than they thought to do that)?  

Nick Vogel

I am one of the advisors on the team. My role is to meet with clients, learn about their goals, and then help make sure their financial plan can accomplish those goals. Internally, I am the one “coordinating the plan” with all the other helpful members of the team who are getting things done behind the scenes. As the CPA of the firm, and a former tax accountant, I am passionate about taxes. I often field accounting questions for clients who own businesses and tackle thornier tax questions and tax issues for my clients and others. Each spring, I make sure the firm is preparing clients’ tax returns quickly and efficiently. In sum, I like getting to know clients and I like taxes!   

MaryBess Gordon

My primary role is leading the Client Services team, making sure our clients feel supported and have the help needed to execute their financial plan. However, I like to joke that my unofficial title is Chaos Coordinator as I work to help things run smoothly behind the scenes as well; everything but the advising if you will. My role is all about building strong relationships, solving problems, and keeping both our clients and our team set up for success.

Joe Miebach

I am the financial planner behind the scenes who is taking the information you provide and synthesizing it into (hopefully) helpful reports and analyses. I am often the one bugging you with requests for account details and paystubs and the like. At the core, my main role is equipping your advisor with what they need to have a valuable conversation with you. Hopefully a majority of the details are being handled behind the scenes so that you can spend as much time as possible in conversation with your advisor and thinking big picture about your hopes, dreams, and fears.

Jake Kuebler

At Bluestem, I wear two hats. As a Senior Advisor, I lead client relationships to help connect each client’s story to their money and the planning our team crafts behind the scenes. As a Managing Partner, I guide the firm’s evolution alongside Josh, focusing on how technology and team strengths can deepen our value, how we tell our story to the public, ensure every client finds the right fit and support, and oversee day-to-day business operational tasks.

Sam Wesley

As a Financial Planning Resident at Bluestem, I get to help families bring clarity and confidence to their financial lives while growing both personally and professionally through real, hands-on experience. The residency gives me the chance to work directly with families and individuals, while building financial plans that reflect their goals, values, and what truly matters most. Here is a recently published blog outlining more of my experiences in my first year and a half at Bluestem!: Shaping the Future of Financial Planning: A Resident's Perspective — Bluestem Financial

Julie McClure

I am the smiling face you see when you walk through the doors, the friendly voice who answers the phone, and the person sending you all those helpful reminders to sign things, schedule things, and submit things. I'm processing your paperwork and double checking each day to make sure that it's doing so correctly, and that your money is moving the way it's supposed to. In addition to daily tasks like these, I work on marketing and outreach. I put together the newsletter and blog each month, and work alongside MaryBess to help plan the client event and other fun gatherings.

Shaping the Future of Financial Planning: A Resident's Perspective

Last year, Bluestem published a blog highlighting our Financial Planning Residency Program, a two-year opportunity designed to bridge the gap between graduation and becoming a client-ready financial advisor. As a current resident, I’d like to share what the experience has meant to me personally.

Over the past year, the residency has allowed me to grow in ways that go far beyond technical knowledge. I have built financial plans, participated in client meetings, and learned the inner workings of firm operations, all while earning the experience hours required for the CFP® marks. I even passed the CFP® exam during tax season, an achievement made possible by the program’s structure and support.

The residency also encourages creativity and leadership. One highlight for me was leading a project to research and integrate AI notetaking into client meetings, improving both training and efficiency. Opportunities like this, where you can take ownership and make an impact, are one of the many benefits of working in a small, collaborative firm.

What truly sets Bluestem’s residency apart is the intentional mentorship and structured development. The environment is supportive and team-oriented, with every member invested in your success. By the end of two years, residents ideally graduate with their CFP® marks, meaningful client experience, and the confidence to step into an advanced advisor role.

For students or recent graduates, this program is more than a first job. It is a launching pad for a rewarding career in financial planning. If you are looking for a place to learn, grow, and make a lasting impact, Bluestem’s Financial Planning Residency is worth exploring.

Tip of the Month: Requesting Your Free Credit Report

It’s good practice to regularly review your credit report. Not only does it allow you to monitor your credit activity and notice any signs of fraud before it becomes a larger problem, but it will also keep you aware of your broader financial picture when it comes to the varied types of credit you are using. And, if you notice any errors in your report, you can take action to report them, so you are not negatively impacted by incorrect information.

How do I do it?

There are three main credit reporting agencies: Equifax, Experian, and TransUnion. They’ve joined forces on one website (https://www.annualcreditreport.com/) where you can put in one request and get a report from each agency. Despite the name of the website, the law has changed, and you can request a credit report once a week for free. You probably have better things to do than to do this on a weekly basis, and that amount of frequency probably isn’t necessary. However, a once-a-year review of your credit report is very reasonable. You also may want to request a report prior to purchasing a home or a car with credit.

What information will it give me?

Each of the three credit reporting agencies offers an example of what your credit report might show. They tend to contain these pieces of information:

• Personal information (name, phone, current and previous addresses, date of birth, social security number)

• Credit account information, including the type of account, when it was opened, the original balance, the name of the loan company, and payment history

• Collections – past due accounts that have been taken over by a collections agency

• Bankruptcies

• Inquiries – when an entity requests a credit report. A hard inquiry indicates a lender or creditor has reviewed your report after you’ve applied for a credit card, mortgage, or auto loan. A soft inquiry is typically when you are checking your report, or when a current creditor is reviewing your credit.

If you notice an error in reporting, you can contact the reporting agency to dispute it. The Consumer Financial Protection Bureau offers guidance on how to do this.

What if it appears there’s been fraudulent activity?

Last year we shared a Tip of the Month on how to deal with possible identity theft or a data breach. You’ll find helpful information there on how to contact the credit agencies and put a freeze on your account.

References:

https://www.usa.gov/credit-reports

https://www.transunion.com/how-to-read-your-credit-report

https://www.experian.com/blogs/ask-experian/credit-education/report-basics/understanding-your-experian-credit-report/

https://www.equifax.com/personal/education/credit/report/articles/-/learn/understanding-credit-report-history/

https://www.myfico.com/credit-education/whats-in-my-credit-report

Tip of the Month: Sharing and Storing Your Estate Documents Wisely

Creating your estate documents is an essential part of a well-built financial plan but knowing what to do with those documents once they’re signed is just as important.

So, who needs copies? Where should they be stored? And what else should you be thinking about when it comes to organizing this important part of your legacy?

Here are some best practices to keep in mind.

What to Include

At a minimum, your estate plan should include:

• Last Will and Testament

• Powers of Attorney (for property and for healthcare)

• Any Trust documents, if it’s a good fit for your situation

• Advance Directives, such as a Living Will or Health Care Proxy

These are the tools your loved ones and trusted agents will rely on if you become incapacitated or pass away, so it's important that they're both complete and accessible.

Where Store Them and who should have them

Your attorney will likely keep the original on file, but we recommend the following:

• Keep your own original documents in a safe, secure, and accessible location, such as a fireproof home safe or a bank lockbox.

• Maintain electronic copies for easy access and sharing when needed.

• Make sure anyone named in your documents, such as your executor or power of attorney agent, has a copy or knows how to access one.

Just as important, make sure these people know where the documents are kept and how to access them. If the documents are in a lockbox, for example, they'll need to be listed as an authorized user. If stored in a safe, they'll need the code.

Think Beyond the Paper

Estate planning is more than just signing documents. It’s about helping someone step into your shoes during a difficult time. That person will likely be facing a number of logistical tasks, but they’ll also be carrying emotional weight. The more guidance you can give them, the better.

Try walking through your daily life and asking yourself: if someone else had to manage this, what would they need to know?

• What bills are paid automatically?

• Who should they contact for help?

• What accounts do you hold, and where?

• What devices or platforms hold important digital information and how can those trusted individuals access them?

More companies, including Google, are beginning to offer “digital legacy” features that allow someone you trust to access certain accounts after you pass away. These tools can be worth looking into as part of your broader planning. For more information about your digital legacy, check out our Tip of the Month on that topic.

Talk About It

The most important step you can take is simply to talk to the people you've chosen to help manage your affairs. These topics can be tough, but honest communication makes a world of difference.

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Intentional planning and proactive communication go a long way in supporting the people you trust and love. If you, a friend, or someone in your family is thinking about estate planning, wants help weaving legacy into their financial plan, or is managing the affairs of a loved one, they should know that estate planning doesn't have to be overwhelming. Whether it’s help organizing your documents, talking through your legacy wishes, or coordinating with your attorney, let’s start the conversation — Bluestem is here to help.

Tip of the Month: Sign Up for a Password Manager

While I am extremely diligent about password security here at the office (we all are!), I admit that I still have work to do at home. Just this week I had an alert that a frequently used password of mine was found on the “dark web”. As I began to dig into the sites that I used this password for, I realized a lot of them were logins that were set up years ago, and that many of them were for sites that I no longer have a use for. A project this week will be to disentangle myself from those accounts.

However, it did impress upon me the urgency to take a look at my personal password situation for sites I use more frequently. I know that while some have a good strong password, many do not. For a long time, I was hesitant to create a bunch of passwords that I wouldn’t remember.

A password manager can remember all of them for me and keep them secure. It’s just a matter of setting aside some time to get started. I love this quote from Wired magazine:

Password managers are the vegetables of the internet. We know they’re good for us, but most of us are happier snacking on the password equivalent of junk food. For nearly a decade, that’s been “123456” and “password”— the two most commonly used passwords on the web. The problem is, most of us don’t know what makes a good password and aren’t able to remember hundreds of them anyway.

We shared a Tip of the Month in 2023 about password managers. This is an updated version of that post. Hopefully it will inspire you (and me) to get our personal passwords in order!

What are password managers?

While different sites might operate in slightly different ways, a password manager generally keeps all your passwords in a “vault” which is accessible with a single sign-in. It adds a layer of security by generating secure passwords and keeping them safe and secure in a singular location. You can even add layers of security using two-factor authentication! These sites are wonderfully useful in taking the hassle out of creating and keeping track of all your important passwords.

What are some options?

• Dashlane

• Bitwarden

• 1Password

• NordPass

How does it work?

• You create an account with a login and “master password”. Most applications have a free options for personal use. You can add features by paying a small amount each month.

• Then the manager can autofill your other passwords directly on your phone or computer.

• You can create folders to categorize and keep track of all passwords in one secure location

• The “generate password” feature can be used any time you need a new, secure password and it will save that information into your vault

What about using the password manager on your web browser?

Most web browsers (Google, Firefox, Safari) have a simple password manager. This article from Consumer Reports shares that this option is a better one than reusing the same weak password over and over. However, there are added benefits to using a separate password manager, including additional layers of security, shared access with other people in your family, and the ability to access your passwords no matter which internet browser you’re using.

Ways to make the most of password managers:

• Use shared folders. Depending on the subscription, you may have the ability to share your vault folders with another trusted contact or family member, which is great for families who share login information.

• Keep your master password somewhere secure. This could be somewhere in your physical files, or written into your estate documents in case someone needs to access your information in an emergency.

• Autofill is your friend. This feature is very useful for saving time when logging into different sites.

• Consider using it to store other information. Many password managers also give you the ability to store other information you’d like to keep secure, such as notes, copies of important documents, or copies of your passport or I.D.

Want more information?

We use Dashlane at our office, but any one of the services listed above has plenty of resources and guides that can teach you how to make the most of your password manager. The Wired article linked above does a nice job of highlighting the pros and cons of the different applications. If you have any questions or would like to know more please reach out to our office via phone or email.

This post was originally authored by Brogan McKay.

Books on Personal Finance: Bluestem Recommendations

Here at Bluestem we relish the opportunity to guide you in all of your financial endeavors, and share our knowledge with you. If you’ve ever felt compelled to explore topics related to personal finance on your own, we can help with that too! Here is a list of recommendations for some additional reading.

Money and Happiness: A Guide to Living the Good Life by Laura Rowley
Explores the connection between financial well-being and happiness, offering practical advice for aligning your money with your values.

The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money by Carl Richards
Uses simple sketches and stories to highlight common financial mistakes and how to avoid them by understanding our own behavior.

Happy Money: The Science of Happier Spending by Elizabeth Dunn and Michael Norton
Reveals how thoughtful spending — on experiences, others, and time — can lead to greater happiness and life satisfaction.

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel
Blends storytelling and behavioral science to show how our emotions and experiences shape financial decisions more than logic.

Why Smart People Do Stupid Things With Money: Overcoming Financial Dysfunction by Bert Whitehead
Identifies financial personality types and offers tailored strategies to overcome money-related blind spots and build lasting wealth.

The Millionaire Next Door by Thomas J. Stanley and William D. Danko
Uncovers the surprising habits of America’s wealthy, emphasizing frugality, discipline, and long-term planning over flashy lifestyles.

A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy by Burton G. Malkiel
Offers a broad overview of investment strategies and market theory, encouraging informed, long-term investing over speculation.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle
A timeless classic that champions the power of low-cost index funds, offering a clear and compelling roadmap for building long-term wealth through simple, disciplined investing.