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

Lockheed Martin 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.

Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 .

How does Lockheed Martin determine the monthly pension benefit for employees nearing retirement, and what factors should employees consider when planning their retirement based on this calculation? Specifically, how do the concepts of "Final Average Pay" and "Credited Years of Service" interact in the pension calculation under Lockheed Martinâ€™s retirement plan?

Lockheed Martin Pension Calculation: Lockheed Martin calculates monthly pension benefits using the "Final Average Pay" (FAP) and "Credited Years of Service" (CYS). The FAP is determined by averaging the three highest annual compensations prior to 2016, while CYS counts the years from employment start to December 31, 2019, when the pension was frozen. The benefit per year of service is calculated based on whether the FAP is less than or exceeds the Social Security Covered Compensation, with specific formulas applied for each scenario. These calculations directly affect the monthly pension benefit, which may also be reduced if retirement commences before a certain age due to early retirement penalties.

Given the recent changes in Lockheed Martin's pension policy, what implications could this have for employees who are planning to retire in the near future? How should these employees navigate their expectations regarding retirement income given that the pension has been frozen since 2020?

Implications of Pension Freeze: Since Lockheed Martin froze its pension plan in 2020, no future earnings or years of service will increase pension benefits. This freeze shifts the emphasis towards maximizing contributions to 401(k) plans, where Lockheed Martin increased its maximum contribution to 10% for non-represented employees. Employees planning for imminent retirement should recalibrate their financial planning to account for this change, prioritizing 401(k) growth and other retirement savings vehicles to compensate for the pension freeze.

What options does Lockheed Martin provide for employees regarding healthcare insurance as they approach retirement age? How do these options compare in terms of coverage and cost, particularly for those who will transition to Medicare upon reaching age 65?

Healthcare Options Near Retirement: As Lockheed Martin employees approach retirement, they can choose from several health insurance options. Before Medicare eligibility, they may use COBRA, a Lockheed Martin retiree plan, or the ACA's private marketplace. Post-65, they transition to Medicare, with the possibility of additional coverage through Medicare Advantage or Medigap plans. Lockheed Martin supports this transition with a Health Reimbursement Arrangement, providing an annual credit to help cover medical expenses.

Understanding the complex nature of Lockheed Martin's pension and retirement benefits, what resources are available to employees to help them navigate their choices regarding pension claiming options? In what ways can the insights from these resources aid employees in making informed decisions about their financial future?

Resources for Navigating Retirement Benefits: Lockheed Martin employees have access to resources like the LM Employee Service Center intranet, which includes robust tools such as a pension estimator. This tool allows for modeling different retirement scenarios and understanding the impacts of various pension claiming options. Additional support is provided through HR consultations and detailed plan descriptions to ensure employees make informed decisions about their retirement strategies.

For employees with varying years of service at Lockheed Martin, how can their employment history impact their pension benefits? What strategies should individuals explore to maximize their benefits given the different legacy systems that might influence their retirement payout?

Impact of Employment History on Pension Benefits: The length and nature of an employee’s service at Lockheed Martin significantly influence pension calculations. Historical changes in pension policies, particularly the transition points of the pension freeze, play critical roles in determining the final pension benefits. Employees must consider their entire career timeline, including any represented or non-represented periods, to understand and maximize their eligible pension benefits fully.

How does the Lockheed Martin retirement plan ensure that benefits are preserved for spouses or dependents after an employee's passing? How do different claiming options affect the long-term financial security of the employee's family post-retirement?

Benefit Preservation for Dependents: Lockheed Martin's pension plan includes options that consider the welfare of spouses or dependents after an employee's passing. Options like "Joint and Survivor" ensure ongoing benefits for surviving spouses, while choices like "Life with X-Year guarantee" provide continued payments for a defined period after the employee’s death. Understanding these options helps secure long-term financial stability for beneficiaries.

What steps can Lockheed Martin employees take to prepare financially for retirement, especially if they have outstanding loans or financial obligations? How crucial is it for employees to understand the conditions under which these loans must be settled before retirement?

Financial Preparation for Retirement: Employees approaching retirement should focus on clearing any outstanding loans and maximizing their contributions to tax-advantaged accounts like 401(k)s and Health Savings Accounts (HSAs). These steps are crucial for ensuring a smooth financial transition to retirement, minimizing potential tax impacts, and maximizing available retirement income streams.

With the evolution of Lockheed Martin's retirement initiatives, particularly the shift toward higher 401(k) contributions, how should employees balance contributions to their 401(k) with their overall retirement savings strategy? What factors should they consider in optimizing their investment choices post-retirement?

Balancing 401(k) Contributions: With the pension freeze, Lockheed Martin employees should increasingly rely on 401(k) plans, where the company has increased its contribution cap. Employees must balance these contributions with other savings strategies and consider their investment choices carefully to ensure a robust retirement fund that can support their post-retirement life.

How does Lockheed Martin's approach to retirement planning include the management of health savings accounts (HSAs) for retirees? What are the tax advantages of HSAs, and how can employees effectively utilize this resource when planning for healthcare expenses in retirement?

Management of HSAs for Retirees: Lockheed Martin encourages maximizing contributions to Health Savings Accounts (HSAs), which offer significant tax advantages. These accounts not only provide funds for current medical expenses but can also be used tax-free for healthcare costs in retirement, making them a critical component of retirement health expense planning.

What is the best way for employees to contact Lockheed Martin regarding specifics or questions about their retirement benefits? What channels of communication are available, and how can they access the most current and relevant information regarding their retirement planning? These questions aim to encourage thoughtful consideration and discussion about retirement planning within Lockheed Martin, addressing various aspects of the company's benefits while promoting engagement with internal resources.

Contacting Lockheed Martin for Retirement Benefit Queries: Employees should direct specific inquiries about their retirement benefits to Lockheed Martin's HR department or consult the benefits Summary Plan Descriptions available through company resources. These channels ensure employees receive accurate and comprehensive information tailored to their individual circumstances.

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For more information you can reach the plan administrator for Lockheed Martin at 6801 rockledge drive Bethesda, MD 20817; or by calling them at 863-647-0370.