Changing traditional IRA assets to Roth IRAs during a bear market can provide significant tax savings and tax-free growth over time—and strategic planning with an advisor can help navigate that opportunity, says Michael Corgiat, of The Retirement Group, a division of Wealth Enhancement Group.
'General Mills employees can take advantage of current market conditions and convert traditional IRA assets to Roth IRAs and enjoy tax-free growth now and in the future,' says Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group.
In this article we will discuss:
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1. The upside to converting traditional IRA assets to Roth IRAs during a bear market.
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2. How tax trade-offs and tax bracket management affect IRA conversions.
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3. Benefits of Roth IRA rules - no RMDs for original account holder.
The current bear market may offer an opportunity to convert traditional IRA assets to Roth IRAs. Converted assets are taxed as ordinary income in the year of conversion—a big tax bill in that year. But if your traditional IRA assets have appreciated in value, you will be taxed on a lower asset base when you convert. All conditions are met, and no additional income tax liability for you or your beneficiaries from the Roth account will result from the account growth.
According to a new report from Employee Benefit Research Institute (EBRI), most retirees spend less in retirement than they did working years. And only 7% of retirees said they spent more in retirement than before retirement. That means retirees might not need so much retirement income after all, and converting traditional IRA assets to Roth IRAs might be a smart way to reduce taxes and increase retirement savings:
Tax Trade-Off
One reason to delay taxes on General Mills retirement savings is that you may be in a lower tax bracket in retirement and a current tax deduction may be better than tax-free income in retirement. The Tax Cuts and Jobs Act's lowered rates expire after 2025 but might have changed your calculation. A cost-benefit analysis might reveal whether it makes sense to pay taxes on some of your IRA assets now rather than later. One strategy is to 'fill your tax bracket,' or convert an asset's value to keep your tax classification. This requires an estimate of your 2022 income.
Lower Values, More Shares
If you have traditional or Roth IRAs at the same custodian, you can typically transfer funds between the accounts. So when share prices are low, you can convert more shares for each taxable dollar and have more shares in your Roth account for tax-free growth. The converted assets could also lose value. You could also directly deduct taxes on the converted assets—which is generally unwise.
Two Time Tests
There are two five-year retention periods for Roth accounts: one for withdrawals of earnings and the other for conversions. Tax-free and penalty-free withdrawals of earnings, including earnings on converted amounts, must be within five years of the first Roth account opening date and must be made after age 59½ unless an IRS exception applies. This need not be a problem if you already have a Roth IRA, but could be if you open your first Roth IRA for the conversion.
Since you paid taxes at the time of conversion, assets converted to a Roth IRA can be withdrawn at any time without conventional income tax. However, you may be penalized by 10% if you withdraw the assets before the end of a different five-year period beginning on January 1 of each conversion year unless you are at least 59½ years old or under another exception.
More Favorable RMD Rules
Roth IRAs are not subject to required minimum distribution (RMD) rules while the original owner is alive—unlike traditional IRAs. Those whose spouse's Roth IRA is considered their own are also sheltered from RMDs during their lifetimes. Other inheritors of a Roth IRA must complete RMD requirements. In any event, distributions from a Roth IRA would be tax-free. The longer your investments can grow, the better tax-free income may be for you and your beneficiaries.
No investment strategy can guarantee success for General Mills employees—all investing involves risk—including losing principal.
It's like planting seeds in a garden during a drought to convert traditional IRA assets to Roth IRAs in a bear market. As odd as it is to plant when supplies are tight, planting during a drought can produce a more plentiful harvest when the rains return. Likely, converting traditional IRA assets to Roth IRAs during a bear market will net you a lower tax bill and more tax-free growth in the long haul despite the initial tax hit. Like gardening, planning ahead and having patience will help.
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- Corporate Employees: 8 Factors When Choosing a Mutual Fund
- Use of Escrow Accounts: Divorce
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- Stages of Retirement for Corporate Employees
- 7 Things to Consider Before Leaving Your Company
- How Are Workers Impacted by Inflation & Rising Interest Rates?
- Lump-Sum vs Annuity and Rising Interest Rates
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Sources:
1. 'Should I Do a Roth IRA Conversion When the Market Is Down?' Thrivent , www.thrivent.com/insights/retirement-planning/should-i-do-a-roth-ira-conversion-when-the-market-is-down?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
2. '2024 Spending in Retirement Survey.' Employee Benefit Research Institute , www.ebri.org/content/2024-spending-in-retirement-survey?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
3. 'Fight the Bear-Market Blues with a Roth IRA Conversion.' Marshall Financial , www.marshallfinancial.com/roth-conversion-when-market-is-down/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
4. 'Leveraging Tax Advantages of Roth Conversion in Bear Markets.' Kitces.com , www.kitces.com/blog/roth-conversion-bear-market-downturn-tax-savings-cost-conversion-averaging-isolate-ira-basis/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
5. 'Got an IRA? Here's How to Use the Bear Market to Your Advantage.' Money , www.money.com/convert-roth-ira-bear-market/?utm_source=chatgpt.com . Accessed 27 Feb. 2025.
How can employees of General Mills, Inc. maximize their benefits under the BCTGM Retirement Plan, and what factors are considered in determining pension amounts for those nearing retirement? This question aims to explore the intricate details of how General Mills, Inc. structures its pension benefits to support employees’ future financial stability. It's important for employees to understand the value of their years of service and how this affects their ultimate pension payout as they approach retirement.
Maximizing Benefits under the BCTGM Retirement Plan: Employees of General Mills can maximize their benefits under the BCTGM Retirement Plan by understanding how their years of service and negotiated benefit levels directly affect the pension they receive. The pension amount is determined by the length of service and a defined benefit formula based on the number of years of Benefit Service accrued. As employees approach retirement, they should consider whether they meet eligibility criteria for early or normal retirement, as these factors influence the ultimate pension payout(General_Mills_2024_Pens…).
What are the eligibility requirements for participating in the BCTGM Retirement Plan at General Mills, Inc., and how does this participation impact future retirement benefits? Employees should be well-informed about what constitutes eligibility to participate in the retirement plan. Understanding criteria such as service length, employment status, and union participation is crucial, as it directly relates to their ability to accrue retirement benefits.
Eligibility Requirements for BCTGM Retirement Plan: To participate in the BCTGM Retirement Plan, employees must be regular employees of General Mills covered by a collective bargaining agreement. Eligibility is automatic after completing a probationary period. Participation impacts future retirement benefits as employees begin to accrue pension benefits based on years of service, which contributes to their final payout during retirement(General_Mills_2024_Pens…).
In what ways does General Mills, Inc. ensure that benefits from the BCTGM Retirement Plan remain protected under federal law, and what role does the Pension Benefit Guaranty Corporation (PBGC) play in this? Knowledge of the protections available can significantly influence employees' assurance in the viability of their pension benefits. It is vital for employees to recognize how federal guarantees work in safeguarding their retirement benefits.
Federal Law Protections and PBGC's Role: The BCTGM Retirement Plan is protected under federal law, ensuring that employees’ retirement benefits are safeguarded. The Pension Benefit Guaranty Corporation (PBGC) insures vested benefits, including disability and survivor pensions, up to certain limits. This protection provides employees with assurance that their pensions are protected, even in the event of plan termination(General_Mills_2024_Pens…).
How does General Mills, Inc. address the complexities of vesting in the BCTGM Retirement Plan, and what can employees do if they are concerned about their vested rights? Vesting is a key concept that affects employees' access to benefits over their careers. Employees need to understand the vesting schedule outlined by General Mills, Inc. and the implications it has on their retirement plans.
Vesting in the BCTGM Retirement Plan: Employees vest in the BCTGM Retirement Plan after completing five years of Eligibility Service or upon reaching age 65. Once vested, employees have a non-forfeitable right to their pension benefits, which means they retain their pension rights even if they leave the company before reaching retirement age(General_Mills_2024_Pens…).
What options are available to employees of General Mills, Inc. if they experience a change in their employment status after being vested in the BCTGM Retirement Plan, and how might this impact their future retirement pensions? This question prompts discussion on the plan's provisions regarding reemployment and what employees should be aware of when considering changes to their employment status.
Impact of Employment Status Changes on Pension: If an employee's status changes after being vested in the BCTGM Retirement Plan, such as leaving the company, they may still be entitled to pension benefits. The plan outlines provisions for reemployment and how prior service years are counted toward future pension calculations. Employees who are reemployed may have their previously earned service restored(General_Mills_2024_Pens…).
How does the BCTGM Retirement Plan at General Mills, Inc. work in conjunction with Social Security benefits, and what should employees be aware of regarding offsets or deductions? This can encompass the interplay between corporate pension plans and governmental benefits, which is critical for employees to plan their retirement effectively.
Coordination with Social Security Benefits: The BCTGM Retirement Plan operates in addition to Social Security benefits. There are no direct offsets between the pension and Social Security benefits, meaning employees receive both independently. However, employees should be aware of how the timing of drawing Social Security and pension benefits may affect their overall financial situation(General_Mills_2024_Pens…).
What steps must employees of General Mills, Inc. take to initiate a claim for benefits under the BCTGM Retirement Plan, and how does the claims process ensure fairness and transparency? A clear comprehension of the claims process is essential for employees to secure their pension benefits. This question encourages exploration of the procedures in place to assist employees in understanding their rights and options.
Claiming Benefits under the BCTGM Retirement Plan: Employees must terminate employment before claiming their BCTGM Retirement Plan benefits. The claims process involves submitting the required forms, and employees must ensure they provide all necessary documentation for a smooth process. The pension is generally paid monthly, with lump-sum options available under specific circumstances(General_Mills_2024_Pens…).
How does the retirement benefit formula of the BCTGM Retirement Plan operate, and what specific factors should an employee of General Mills, Inc. consider while planning for retirement? Delving into the calculations involved in determining retirement benefits is important for employees to understand how their service years and other contributions come together to form their final retirement payout.
Retirement Benefit Formula: The retirement benefit formula is calculated based on the years of Benefit Service and a defined benefit level. As of 2024, for each year of Benefit Service, employees receive $87 per month (increasing to $88 after June 1, 2025). Planning for retirement involves considering how long they will work and the benefit level in place at the time of retirement(General_Mills_2024_Pens…).
What additional resources or support does General Mills, Inc. provide to assist employees in planning their retirement and ensuring they make the most of their benefits offered under the BCTGM Retirement Plan? Understanding the tools and resources available can empower employees to take proactive steps in managing their retirement plans effectively.
Resources for Retirement Planning: General Mills offers resources like the Benefits Service Center and online portals (e.g., www.mygenmillsbenefits.com) to assist employees with retirement planning. These tools help employees understand their benefits, calculate potential payouts, and explore options for maximizing their retirement income(General_Mills_2024_Pens…).
How can employees contact General Mills, Inc. for further information about the BCTGM Retirement Plan or specific queries related to their retirement benefits? This question is crucial so employees know the appropriate channels for communication and can seek clarification on any concerns they may have regarding their retirement planning.
Contact Information for Plan Inquiries: Employees can contact General Mills for more information about the BCTGM Retirement Plan through the Benefits Service Center at 1-877-430-4015 or visit www.mygenmillsbenefits.com. This contact provides direct access to support and answers to questions about their retirement benefits(General_Mills_2024_Pens…).
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