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Navigating the Retirement Income Valley for Kraft Employees

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Healthcare Provider Update: Healthcare Provider for Kraft Kraft Heinz Company primarily offers its employees a healthcare plan through the Aon Health Solutions, which oversees benefits and health resources for the company. As a sizable employer, Kraft provides a variety of health plans, typically including comprehensive medical, dental, and vision coverage. Potential Healthcare Cost Increases in 2026 In 2026, healthcare costs are anticipated to surge significantly for Kraft employees, paralleling broader trends across the Affordable Care Act (ACA) marketplace. With health insurance premiums projected to increase by an average of 18%-and in some states exceeding 60% due to the potential expiration of enhanced federal premium subsidies-many workers could face a financial burden. This perfect storm of rising medical costs and shifting insurance policies signals an increase in out-of-pocket expenses, revealing the critical need for strategic planning among employees to manage their healthcare finances effectively. Click here to learn more

'Understanding the 'income valley' offers Kraft employees a critical opportunity to strategically manage their tax burdens during retirement, and with the recent SECURE 2.0 Act changes, it's more important than ever to implement tax-efficient strategies well in advance of required minimum distributions.' – Paul Bergeron, a representative of The Retirement Group, a division of Wealth Enhancement Group.

'Kraft employees approaching retirement can significantly benefit from planning during the 'income valley,' utilizing tax-saving strategies and Roth conversions to lower their overall tax burden, especially with the SECURE 2.0 Act providing more flexibility before RMDs begin.' – Tyson Mavar, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

  1. The concept of the 'income valley' and its significance for retirement planning.

  2. Tax-efficient strategies such as tax-saving withdrawals, Roth conversions, and charitable giving during the income valley.

  3. The impact of the SECURE 2.0 Act on retirement planning and RMDs.

When it comes to retirement planning, time is one of our most precious resources. Building a nest egg that can support a comfortable retirement requires effective use of time, particularly in the form of compound profits. Traditional and Roth retirement savings, taxable accounts, and Social Security income are frequently used to finance retirement. But for many people, retirement doesn't always begin at a specific age, and when to make key retirement-related decisions can significantly affect increasing retirement income and reducing taxes.

For Kraft employees born in 1960 or later, the full retirement age for Social Security benefits is 67. However, recent legislative amendments have added additional factors to retirement planning. The required minimum distribution (RMD) age was raised from 72 to 73 by the SECURE 2.0 Act, which went into effect in 2023. This presents new opportunities for tax planning by allowing those who retire at age 67 to delay RMDs for an additional year.

Starting in 2033, the RMD age for individuals born in 1960 or later will rise to 75, providing more time to manage taxes before required withdrawals from tax-deferred retirement plans like 401(k)s and IRAs. Though this change is still years away, it will significantly affect how retirees manage their taxes and income in the years before RMDs.

For tax planning, understanding this time frame—known as the 'income valley'—can be quite beneficial. The period between retirement and the start of mandatory minimum distributions is called the 'income valley.' During this time, a retiree may find themselves in a lower tax bracket due to reduced taxable income. Depending on the retirement income sources and withdrawal strategy, this period can vary significantly.

Consider the situation of Sally and Carl, a Kraft couple in their early 60s preparing for retirement. With a total pre-retirement income of $150,000, Sally and Carl plan to retire at age 67. They have $55,000 in available income, drawn from a mix of Social Security, their 401(k), and taxable assets, to cover their estimated $95,000 in yearly retirement needs. However, their taxable income may be much lower in the early years of retirement than later on, as they begin their retirement before the mandatory minimum distributions start.

The Income Valley's Mechanisms

In this example, Sally and Carl plan to use their $250,000 bank account and $1,000,000 401(k) to pay for their living expenses in the first few years of retirement. They can tap into their taxable accounts and take withdrawals from their checking accounts during this income valley period without incurring significant tax liabilities. Sally and Carl would be able to live on relatively low taxable income during this time since withdrawals from non-tax-deferred accounts, such as their bank or brokerage account, would not be counted as taxable income.

Since their Social Security payouts are taxed up to 85%, using non-taxable funds first can provide substantial tax relief before RMDs begin. This period also offers them a chance to figure out the most tax-efficient way to manage their 401(k) withdrawals. The scenario changes when they start taking withdrawals from their 401(k) at age 72, as they will be taxed as ordinary income, which may push them into a higher tax bracket.

Handling the Income Valley

For retirees, the income valley presents a unique opportunity to implement strategies that can lower overall tax burdens. Retirees like Sally and Carl might want to consider three tax solutions during the income valley years:

Tax-Saving Withdrawals

Making tax-efficient withdrawals is one of the best ways to manage taxes in retirement. This involves carefully selecting the source of the money used to cover living expenses based on tax treatment. For example, a retiree might withdraw from taxable assets first, followed by tax-deferred accounts like a 401(k), and finally, tax-free Roth accounts. This strategy organizes withdrawals in the most tax-efficient order.

Another tactic is proportional withdrawals, where money is withdrawn from each account based on their total amounts. This strategy helps reduce the chances of being pushed into a higher tax bracket later in retirement and maintains a more stable income stream. By carefully managing withdrawals from tax-deferred accounts, retirees can reduce lifetime taxes and future RMDs while in lower tax brackets.

However, this strategy's impact on Social Security taxes must be carefully considered. Withdrawals from tax-deferred accounts raise taxable income, which could result in higher taxes on Social Security benefits. Additionally, the retiree might be placed in a higher Medicare premium bracket due to increasing income. It is essential to consult with a tax professional before making any retirement planning decisions.

Roth Conversions

Converting tax-deferred retirement funds (like an IRA or 401(k)) into a Roth IRA is known as a Roth conversion. While Roth accounts grow tax-free and allow for tax-free withdrawals in retirement, retirees must pay taxes on the converted amount today. Conducting a Roth conversion during a period of low taxable income, such as the income valley, is especially advantageous.

Retirees can reduce the size of their tax-deferred accounts and, consequently, their RMDs (and related taxes) after they start by transferring a portion of their 401(k) funds into a Roth IRA during the income valley. Roth IRAs provide more control over retirement income in later years since they are not subject to RMDs.

However, like tax-efficient withdrawals, Roth conversions may temporarily increase taxable income, which could lead to higher Social Security taxes and higher Medicare premiums. Future tax implications should be carefully considered before deciding to convert funds into a Roth IRA, as the timing of the conversion can significantly impact its outcome.

Charitable Giving

Charitable donations can substantially lower taxable income during the income valley for retirees who are philanthropically inclined. By contributing to charities, retirees can support causes they care about while lowering their taxable income. Donations can dramatically reduce tax liabilities if the retiree itemizes deductions.

The Qualified Charitable Distribution (QCD) is particularly beneficial for retirees. A QCD allows individuals to donate up to $100,000 per year to a qualified charity directly from their IRA. The QCD is not included in taxable income but counts as a distribution for RMD purposes. This strategy allows retirees to meet their RMD requirement without increasing their taxable income. As of 2025, retirees may be able to lower their RMD levels and further reduce their tax burden by using QCDs.

QCDs are a simple method to give back while lowering taxable income because they don't need to be itemized, unlike traditional charity donations.

Considerations & Restrictions

While these strategies can be effective in reducing taxes during retirement, not all retirees will have the same flexibility in managing their retirement income. Some retirees may have limited options for withdrawing funds, particularly if they mostly rely on tax-deferred accounts like 401(k)s or IRAs. In such cases, the ability to strategically withdraw from taxable or tax-free funds may be limited, reducing their ability to lower taxable income.

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Moreover, retirees with additional income sources—such as pensions, annuities, or rental income—may find their taxable income increases, making it more difficult to implement these tax-efficient strategies. While they may still be able to manage their withdrawals, they have little control over the taxation of their other income sources.

The SECURE 2.0 Act's delay of RMDs provides retirees more time to strategize their tax planning. It is crucial to consult with financial professionals to understand how these changes might impact individual situations.

In summary, the income valley offers retirees a valuable window to manage taxes before RMDs begin. By implementing strategies like tax-efficient withdrawals, Roth conversions, and charitable giving, retirees can reduce their tax burden, spread out tax payments, and preserve more of their hard-earned savings.

Kraft employees should also consider healthcare expenses as they approach the income valley. According to a Fidelity Investments study, excluding long-term care, the average couple retiring at age 65 in 2023 will need approximately $315,000 for healthcare expenses during retirement. By planning for these needs during the income valley, when taxable income is lower, retirees can better manage their resources and avoid financial strain. Planning for healthcare is essential to long-term financial well-being.

Learn how to navigate the retirement income valley with smart withdrawal strategies and tax-saving solutions. Discover how you can lower your tax burden, enhance your retirement savings, and take advantage of the SECURE 2.0 Act's provisions to safeguard your financial future. By making informed choices today, you can plan for a more comfortable retirement.

Consider the retirement income valley as a calm stretch of a long journey. Just as a driver might ease off the pedal to conserve fuel on a flat, easy stretch of road, retirees can reduce taxes and preserve wealth during this period before RMDs begin.

Source:

1. 'What the Wealthy Get Right About Retirement Withdrawals.'   Investopedia , 2 May 2025,  www.investopedia.com/articles/retirement/101/wealthy-get-right-about-retirement-withdrawals . Accessed 4 May 2025.

2. 'Charitable Trusts vs. Private Foundations: What Is Right for You?'   Investopedia , 2 May 2025,  www.investopedia.com/articles/retirement/101/charitable-trusts-vs-private-foundations . Accessed 4 May 2025.

3. Foster, Lauren. 'The Market Is Swinging Wildly. Should Retirees Wait to Take RMDs?'   Barron's , 1 May 2025,  www.barrons.com/articles/market-swinging-wildly-rmds-should-retirees-wait . Accessed 4 May 2025.

4. 'Understanding the Retirement Income Valley.'   Fidelity Investments , 30 Apr. 2025,  www.fidelity.com/retirement-planning/retirement-income-valley . Accessed 4 May 2025.

5. 'SECURE 2.0 Act Changes RMD Rules.'   Ascensus , 25 Oct. 2023,  www.ascensus.com/news/secure-2-0-act-rmd-changes . Accessed 4 May 2025.

How does the pension plan offered by Kraft Foods Global, Inc. compare to standard retirement plans in terms of employer contribution allocation, and what specific policies should employees be aware of when considering their retirement options through Kraft Foods Global, Inc.?

Kraft Foods Global, Inc. Pension Plan vs. Standard Retirement Plans: The pension plan offered by Kraft Foods Global, Inc. operates as a defined benefit plan, which allocates employer contributions based on years of service and compensation, ensuring steady retirement income based on a formula. This contrasts with standard retirement plans like 401(k)s, where contributions are often employee-driven and subject to market performance. Employees should understand that the guaranteed nature of a pension provides long-term stability, but they must consider the plan’s specific terms regarding eligibility, vesting, and distribution options.

In what ways do the eligibility requirements for contributions to the retirement plans at Kraft Foods Global, Inc. align with IRS regulations for 2024, and what should employees know about these rules when planning their retirement funds?

Eligibility and IRS Regulations for 2024: The eligibility requirements for Kraft Foods Global, Inc.’s retirement plan align with IRS regulations by requiring one year of service for plan participation, with no minimum age requirement. This is typical for defined benefit plans and is in line with IRS standards for qualified plans. Employees planning their retirement funds should ensure they meet the service requirements and understand that contributions are employer-funded rather than employee-driven, unlike other retirement plans that follow IRS contribution limits​(Kraft Foods Global Inc_…).

Considering the defined benefit plan structure of Kraft Foods Global, Inc., how are distributions processed at retirement, and what potential tax implications should employees consider when deciding between a lump sum or annuity option upon retirement?

Distribution Options and Tax Implications: Kraft Foods Global, Inc.’s defined benefit plan offers both lump sum and annuity options for retirement distributions. Employees must carefully consider tax implications: lump sums may be subject to immediate taxation, while annuity payments spread income over time, potentially offering tax advantages. Employees should evaluate their financial needs and tax situation to choose the most suitable option for their retirement​(Kraft Foods Global Inc_…).

How does Kraft Foods Global, Inc. ensure the stability and sustainability of its retirement funds, known as the retirement plan funding levels, and what measures are in place to protect employees' interests in case of economic downturns?

Retirement Plan Stability and Economic Downturns: Kraft Foods Global, Inc. ensures the stability and sustainability of its retirement funds through a well-funded pension plan, with funding levels reported at over 100%. This level of funding offers protection against economic downturns, safeguarding employee interests. The company also maintains a significant fidelity bond, providing additional security for plan participants in case of adverse financial events​(Kraft Foods Global Inc_…).

What resources are available to employees of Kraft Foods Global, Inc. for financial planning assistance related to their retirement, and how can knowledge of these resources influence their decisions regarding retirement savings and benefits?

Financial Planning Resources: Employees of Kraft Foods Global, Inc. have access to various resources, such as retirement plan summaries and consultations with financial planners. These tools can help employees make informed decisions regarding their retirement savings and benefits, potentially influencing their strategies for maximizing contributions and taking advantage of plan features like early retirement options​(Kraft Foods Global Inc_…).

How should employees at Kraft Foods Global, Inc. approach the process for requesting a distribution from their retirement plan, and what specific information is required to expedite this process effectively?

Requesting a Distribution: Employees at Kraft Foods Global, Inc. must contact the plan administrator to request a distribution. Providing accurate personal information, retirement dates, and preferred payment methods is essential to expedite the process. It’s crucial to ensure that all documentation is complete to avoid delays​(Kraft Foods Global Inc_…).

How does the participation in the additional retirement plans offered by Kraft Foods Global, Inc., such as the Thrift Investment Plan, benefit employees in the context of overall retirement savings and IRS contribution limits for 2024?

Additional Retirement Plans and IRS Contribution Limits: Participation in Kraft Foods Global, Inc.’s Thrift Investment Plan allows employees to enhance their retirement savings while adhering to IRS contribution limits for 2024. This plan complements the pension plan by offering a defined contribution option, giving employees the chance to maximize their overall retirement savings through a combination of employer contributions and personal investments​(Kraft Foods Global Inc_…).

What communication channels does Kraft Foods Global, Inc. provide for employees to ask questions or seek clarification regarding their retirement benefits, and what should employees include in their inquiries to receive detailed answers?

Communication Channels for Retirement Benefits: Kraft Foods Global, Inc. provides clear communication channels through its HR department and plan administrators, where employees can ask detailed questions about their retirement benefits. It’s advisable for employees to include specific details in their inquiries, such as their years of service and expected retirement dates, to receive thorough responses​(Kraft Foods Global Inc_…).

How do the overall retirement plan offerings at Kraft Foods Global, Inc. facilitate long-term financial security for employees compared to industry standards, and what unique features should employees leverage to maximize their retirement savings?

Maximizing Long-Term Financial Security: The retirement plan offerings at Kraft Foods Global, Inc. focus on long-term financial security by providing guaranteed income through its defined benefit structure. Compared to industry standards, this approach offers employees a more predictable and stable source of retirement income. Employees should leverage features like early retirement options and understand their full benefit potential to optimize their financial outcomes​(Kraft Foods Global Inc_…).

What strategies should employees at Kraft Foods Global, Inc. employ to ensure they remain informed about ongoing changes in retirement planning regulations and plan offerings as they approach retirement, especially in light of any adjustments to IRS rules or company policies?

Staying Informed on Retirement Plan Changes: Employees should stay informed about ongoing changes in retirement planning regulations and company policies by regularly reviewing updates from Kraft Foods Global, Inc. and keeping track of IRS adjustments. Attending company-provided financial planning seminars and consulting with financial advisors can help ensure that employees are well-prepared for retirement, especially as IRS rules or plan offerings evolve​(Kraft Foods Global Inc_…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.
Kraft Heinz offers both a traditional defined benefit pension plan and a defined contribution 401(k) plan. The defined benefit plan provides retirement income based on years of service and final average pay. The 401(k) plan features company matching contributions and various investment options, including target-date funds and mutual funds. Kraft Heinz provides financial planning resources and tools to help employees manage their retirement savings.
Kraft Heinz is undergoing a major restructuring in 2024, including layoffs and changes to its employee benefits to improve cost efficiency. The company continues to focus on its core food and beverage businesses. Understanding these changes is crucial in today's economic and business landscape, as they impact the company's strategic priorities and financial health.
Kraft Heinz includes RSUs in its employee compensation packages, which vest over a specific period and convert into shares. Stock options are also provided, enabling employees to purchase shares at a predetermined price.
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