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Alcoa Employees: Should You Delay Your RMD When the S&P 500 Is Down?

Alcoa employees should carefully time their Required Minimum Distributions (RMDs) to avoid selling assets at reduced prices during market downturns, as strategic withdrawal planning can help preserve future portfolio growth and minimize unnecessary tax burdens. – Michael Corgiat, a representative of The Retirement Group, a division of Wealth Enhancement Group.

Alcoa employees should consider the impact of market volatility on their RMD strategies, as delaying withdrawals during market downturns can allow for potential recovery, helping to protect long-term retirement assets and minimize tax exposure. – Brent Wolf, a representative of The Retirement Group, a division of Wealth Enhancement Group.

In this article, we will discuss:

Impact of market fluctuations on RMD timing strategies
Differences between RMDs and Roth IRA conversions
Portfolio composition and tax-efficient approaches for Alcoa retirees

Navigating RMDs Amid Market Volatility

Market fluctuations can complicate income planning for retirees relying on distributions from retirement accounts. As of 2025, the IRS requires individuals aged 73 and older to take annual RMDs from tax-deferred accounts like 401(k)s and traditional IRAs. The RMD amount is calculated based on the account balance as of December 31 of the previous year, divided by a life expectancy factor provided by the IRS. Younger Alcoa retirees, while not subject to RMDs, may still need to make withdrawals to cover living expenses.

Historically, many have delayed their RMDs until year-end to better assess their annual income and potentially minimize tax implications. Others opt for monthly or quarterly distributions. However, with current market volatility affecting major indices like the Dow Jones Industrial Average, Nasdaq, and S&P 500, the timing of these withdrawals has become more consequential.

Challenges of Fixed RMD Calculations During Market Downturns

A key issue is that RMD calculations are based on the account value at the end of the previous year and do not adjust for market declines that may occur afterward. For instance, if a retiree's IRA was valued at $850,000 on December 31, 2024, their 2025 RMD would be approximately $33,000. If the market value drops to $790,000 by April 2025, the retiree is still obligated to withdraw the full $33,000, potentially requiring the sale of more shares at reduced prices.

Pam Krueger, founder of Wealthramp, highlights this predicament: Selling assets at reduced prices to meet a withdrawal requirement based on a higher previous value can be a double-edged sword.

Distinguishing Between RMDs and Roth IRA Conversions

A common misconception is treating RMDs and Roth IRA conversions similarly. While converting funds from a traditional IRA to a Roth IRA during market lows can be advantageous due to tax-free growth potential, RMDs involve mandatory withdrawals that are taxed and, if reinvested, may be subject to capital gains taxes.

George Gagliardi, a certified financial adviser in Massachusetts, advises handling RMDs and Roth conversions as separate strategies. He suggests using more stable assets, like short-term bonds, for RMDs to minimize the impact of market volatility, while reserving assets with higher growth potential for Roth conversions.

Importance of Portfolio Composition

The structure of a retirement portfolio significantly influences RMD strategies. Diversified portfolios typically include a mix of cash, bonds, stocks, and short-term securities. Rob Williams, managing director of financial planning at Schwab, emphasizes viewing the portfolio as a collection of distinct assets rather than a single entity.

Portfolios with low-volatility assets, such as Treasury bonds or short-term CDs, can provide liquidity for RMDs without necessitating the sale of equities during downturns. Implementing bond ladders with staggered maturity dates can help align asset availability with RMD schedules.

Considerations for Inherited IRAs

Inherited IRAs present additional complexities. Non-spouse beneficiaries are required to deplete the account within ten years, with RMDs enforced throughout this period. All distributions are taxed as ordinary income. B Capital

Scott Bishop, a Texas-based money manager, encountered a client contemplating early withdrawals from an inherited IRA due to market declines. He suggests a hybrid approach: withdrawing funds (after taxes) and reinvesting them in a taxable brokerage account. This strategy may result in future gains being taxed at lower capital gains rates, potentially reducing the overall tax burden.

Timing RMDs Strategically

While market volatility adds complexity to RMD timing, thoughtful planning remains essential. Since the RMD amount is fixed based on the previous year's account value, retirees have the opportunity to choose when to take distributions. Delaying withdrawals can allow for potential market recovery and defer associated taxes.

Pam Krueger advises against hastily selling assets during market lows, suggesting that waiting can provide both tax deferral and the chance for account value recovery.

Final Thoughts

In uncertain markets, it's important to resist impulsive decisions. The approach to accessing retirement funds—whether through RMDs, inherited IRA withdrawals, or broader income strategies—should focus on minimizing losses and maintaining portfolio value. For Alcoa retirees, this means adopting a methodical approach to withdrawals, utilizing diversified portfolios with components like cash reserves, short-term bonds, and strategically structured ladders to meet distribution needs without compromising future growth.

A Vanguard report from December 2023 indicates that taking RMDs later in the year has historically correlated with higher average portfolio values, as markets often recover from mid-year volatility. In years with presidential elections, the S&P 500 has averaged gains of 7.3% in the second half, suggesting that postponing RMDs may provide more favorable conditions for asset sales.

Analogy

Withdrawing your RMD during a market downturn is akin to selling your home during a housing slump because you must relocate; you may receive less than if you had waited for the market to rebound. By carefully timing withdrawals, retirees can retain more of their investment assets, similar to homeowners waiting for a seller's market. This is especially pertinent when mandatory distributions are based on higher account values from the previous year, regardless of current performance.

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Source:

1. Royal, James. How Required Minimum Distributions Impact Your Traditional IRA Balance. Investopedia , 15 Apr. 2025, www.investopedia.com/required-minimum-distributions-ira-impact-5185475 .

2. Riquier, Andrea. Should I Rush to Take My RMD While the S&P 500 Is Down, or Wait Until the End of the Year Like Normal? MarketWatch , 12 Apr. 2025, www.marketwatch.com/rmd-timing-strategy-s-p-500-2025-5183472 .

3. RMD Strategies to Help Ease Your Tax Burden. Charles Schwab , Jan. 2025, www.schwab.com/rmd-tax-strategy-planning-2025 .

4. Inherited IRAs: What to Know About Taxes, RMDs, and More. Morningstar , Mar. 2025, www.morningstar.com/inherited-iras-rmd-tax-implications-2025 .

5. RMD Strategies for Wealthy Retirees: 2025 Tax Planning Guide. RCS Planning , Mar. 2025, www.rcsplanning.com/rmd-strategies-tax-planning-wealthy-retirees-2025 .

What are the key eligibility requirements for employees to participate in the Pension Plan for Certain Hourly Employees of Alcoa USA Corp, and how do these requirements change if an employee is hired or rehired after April 1, 2022? This question aims to explore the specific criteria that must be met for participation in the plan, providing clarity on both the general eligibility for new employees and any exceptions for those previously employed.

Eligibility Requirements: Employees are automatically eligible for the Pension Plan for Certain Hourly Employees of Alcoa USA Corp if they were hired or rehired before April 1, 2022, have reached age 21, and completed one year of vesting service. Employees hired or rehired on or after April 1, 2022, are not eligible for this pension plan(Alcoa USA Corp_Pension …).

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Vesting Service Calculation: Vesting service determines when an employee becomes eligible for pension benefits. Employees become vested after completing five years of vesting service, which includes both periods of pension service and non-pension service such as absences not counted towards pension service. This is crucial for retirement planning, as it ensures employees are entitled to pension benefits even if they leave the company after becoming vested(Alcoa USA Corp_Pension …).

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Retirement Options: The plan offers normal retirement (at age 65 with five years of vesting service), 60/10 retirement (for employees between 60 and 62 with 10 years of vesting service), and 62/10 retirement (for employees between 62 and 65 with 10 years of vesting service). Disability retirement is also available for those permanently incapacitated with 10 years of vesting service(Alcoa USA Corp_Pension …).

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Survivor Benefits: The pension plan provides automatic surviving spouse coverage unless waived by the employee and spouse. Surviving spouse pensions are payable if the employee dies while actively employed and vested in the plan, after retirement, or while receiving a deferred vested pension. The spouse must submit a written application to claim benefits(Alcoa USA Corp_Pension …)(Alcoa USA Corp_Pension …).

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Pension Calculation: The regular monthly pension is calculated using a formula based on the employee's pension service and a pension factor in effect when pension service ends. For example, if an employee retires at 65 with 10 years of service, the pension factor might be $57 per year of service. The pension is adjusted based on age and service length(Alcoa USA Corp_Pension …).

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Disability Retirement: Employees under 62 who are permanently incapacitated with at least 10 years of vesting service qualify for disability retirement. They must be deemed permanently disabled and unable to return to work in a bargaining unit occupation. A medical examination may be required to confirm ongoing eligibility(Alcoa USA Corp_Pension …).

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Retirement Application Process: Employees must file a retirement application with the plan administrator before their desired retirement date. The application can be filed up to 90 days before retirement, and the process typically includes receiving benefit explanations and payment elections within this timeframe(Alcoa USA Corp_Pension …).

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Pension Benefit Guaranty Corporation (PBGC): The PBGC provides a safety net for pension benefits in the case of plan termination or financial distress. If the pension plan is underfunded, the PBGC ensures employees still receive pension benefits, although certain limitations may apply(Alcoa USA Corp_Pension …).

What resources and support does Alcoa USA Corp provide to its employees for understanding their pension plan, and how can employees reach out for assistance regarding their retirement options? This question emphasizes the resources available to employees for further education and guidance, ensuring they know where to turn for help.

Resources for Understanding the Plan: Employees can access information about their pension plan and retirement options through the Alight Worklife™ website or by calling the Alcoa benefits helpline. These resources offer guidance on applying for retirement and understanding plan benefits(Alcoa USA Corp_Pension …).

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Contacting Benefits Management: Employees can reach out to the benefits management team through the Alight Worklife™ website or by phone at 1-844-31ALCOA. This service provides assistance with pension-related inquiries and retirement applications(Alcoa USA Corp_Pension …).