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Healthcare Provider Update: Verizon collaborates with Aetna as its primary healthcare provider, offering a range of health plans and services to its employees and their families. Looking ahead to 2026, the healthcare landscape is poised for significant change, as record hikes in Affordable Care Act (ACA) premiums are anticipated. With some states facing increases exceeding 60%, many individuals could see their out-of-pocket premiums rise by more than 75%, particularly if enhanced federal premium subsidies are not extended. This scenario could create an additional burden for Verizon employees, emphasizing the importance of strategic planning for healthcare coverage amidst such dramatic shifts in costs. Click here to learn more
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.
'Verizon 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 Verizon 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 Verizon 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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- Medicare Open Enrollment for Corporate Employees: Cost Changes in 2024!
- 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
- Internal Revenue Code Section 409A (Governing Nonqualified Deferred Compensation Plans)
- Corporate Employees: Do NOT Believe These 6 Retirement Myths!
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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 does the Verizon Pension Plan facilitate retirement income for long-term employees, and what specific benefits can employees expect when enrolling in the retirement program provided by Verizon? What unique features does the Verizon Pension Plan offer compared to other retirement plans an employee might have encountered, and how can employees maximize the benefits of these features throughout their career at Verizon?
Verizon Pension Plan Benefits: Verizon's Pension Plan offers substantial benefits aimed at facilitating a secure retirement for long-term employees. Upon enrolling in the retirement program, employees can expect defined benefits that are based on their salary and years of service, ensuring a predictable and stable income after retirement. Unique to Verizon, compared to some other plans, may include options for early retirement under certain conditions and a choice between annuity payments or a lump-sum distribution upon retirement. Employees can maximize these features by planning for long-term service and considering their retirement income needs early in their careers.
In what ways can employees at Verizon strategize their rollover decisions when transitioning from the Verizon Pension Plan to other retirement savings plans upon leaving the company? What factors should be considered by Verizon employees to ensure they are making informed choices regarding rolling over funds to a traditional IRA or another qualified employer plan?
Rollover Strategies: When transitioning from the Verizon Pension Plan to other retirement savings options upon leaving the company, employees should strategize their rollover decisions carefully. Factors to consider include the tax implications, the investment options available in the rollover destination, and the timing of the transfer to avoid penalties. Verizon employees should evaluate the benefits of rolling over to a traditional IRA or another employer's plan, considering their future financial needs and retirement goals.
What are the implications of the recent IRS limits for 2024 concerning contributions to retirement plans for Verizon employees, and how does Verizon align its offerings with these federal regulations? Additionally, how can Verizon employees best take advantage of these limits to enhance their retirement savings while adhering to tax regulations?
IRS Contribution Limits: The implications of IRS limits for 2024 are critical for Verizon employees as these limits dictate how much can be contributed tax-deferred into retirement plans. Verizon aligns its offerings with these federal regulations by adjusting contribution limits in their plans accordingly. Employees are encouraged to maximize their contributions to take full advantage of tax-deferred growth, especially when IRS limits increase, thereby enhancing their retirement savings while adhering to tax regulations.
How does the special tax treatment for lump sum distributions from the Verizon Pension Plan affect employees who receive their benefits early or have specific circumstances, such as being born before 1936? What options do these employees have to manage their tax burden effectively, and how can they best navigate these complicated rules while planning for their retirement?
Tax Treatment of Lump Sum Distributions: The special tax treatment for lump sum distributions from the Verizon Pension Plan can significantly affect employees who opt to receive their benefits early or under specific circumstances like being born before 1936. These employees have options to manage their tax burden effectively by opting for ten-year averaging or capital gain treatment on eligible distributions, allowing for a potentially lower tax rate on their pension benefits.
For surviving spouses and alternate payees of Verizon employees, what are the specific benefits available under the Verizon Pension Plan? How do these benefits compare to those available to employees, and what steps must surviving spouses or alternate payees take to ensure they receive their entitled benefits without delays or complications?
Benefits for Surviving Spouses and Alternate Payees: For surviving spouses and alternate payees, the Verizon Pension Plan offers benefits similar to those available to employees, such as annuity payments or lump-sum options. These beneficiaries must take certain steps to ensure they receive their benefits without delays, such as providing necessary documentation and adhering to plan rules. The plan details and processes for claiming benefits should be clearly understood to avoid complications.
How can Verizon employees utilize the resources available through the Verizon Benefits Center to better understand and manage their retirement benefits? What specific tools and services does the Benefits Center provide, and how can these resources assist employees in making informed decisions regarding their pension plan options?
Utilizing Resources at the Verizon Benefits Center: Verizon employees can utilize various tools and services provided by the Verizon Benefits Center to manage and understand their retirement benefits. The Benefits Center offers personalized consultations, detailed plan documentation, and tools for estimating pension benefits and planning retirement income, assisting employees in making informed decisions about their pension plan options.
What challenges might Verizon employees face regarding eligibility and tax withholding when receiving their pension payments, and how can they mitigate these issues? It's crucial for employees to understand the mechanics of eligibility regarding rollovers and payment processing; what key pieces of information should they be aware of to avoid unexpected taxes?
Challenges in Eligibility and Tax Withholding: Verizon employees might face challenges regarding eligibility and tax withholding when receiving pension payments. Understanding the plan's criteria for eligibility, the implications of rollovers, and the impact of mandatory withholding on distributions is crucial. Employees can mitigate these issues by consulting with the Verizon Benefits Center or a tax advisor to ensure compliance and avoid unexpected taxes.
What is the process for Verizon employees wishing to initiate a direct rollover from the Verizon Pension Plan, and what documentation will they need to prepare? Can employees receive assistance from the Verizon Benefits Center during this process, and how does using a direct rollover benefit them compared to other forms of payment?
Direct Rollover Process: The process for initiating a direct rollover involves deciding the destination of the rollover (traditional IRA or another employer plan), completing necessary documentation, and potentially seeking assistance from the Verizon Benefits Center. A direct rollover helps in avoiding immediate taxes and maintaining the tax-deferred status of retirement savings.
In terms of retirement preparedness, how does the pension plan at Verizon accommodate employees’ needs for financial security in their senior years? What additional education or resources does Verizon provide to assure that employees fully understand their retirement options and the importance of planning ahead?
Retirement Preparedness: Verizon's pension plan is designed to accommodate the financial security needs of employees in their senior years. In addition to the pension benefits, Verizon provides educational resources and planning tools to ensure employees understand their retirement options and the importance of early and consistent retirement planning.
How can employees reach out to the Verizon Benefits Center for further information about the pension plan and other retirement benefits? What specific contact methods are available to employees, and how can these interactions enhance their understanding and management of retirement benefits provided by Verizon?
Contacting the Verizon Benefits Center: Verizon employees seeking more information about their pension plan and other retirement benefits can reach out to the Verizon Benefits Center through various contact methods such as phone, email, or online portals. These interactions are crucial for enhancing understanding and effective management of retirement benefits, ensuring employees make the most of the benefits available to them.
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