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While Roth individual retirement account conversions may be alluring when the stock market dips, it’s easy to make mistakes.
Investors need to consider the “big picture,” the pro-rata rule and other tax consequences, financial experts say.

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Roth individual retirement account conversions may be alluring when the stock market dips. But it’s easy to make mistakes, financial experts say.
The strategy, which transfers pre-tax IRA funds to a Roth IRA for future tax-free growth, may pay off when the market drops because you can buy more shares for the same dollar amount.

There’s also the chance for tax savings, depending on how much you transfer.
“Doing a Roth conversion while the market is down is a great idea since more shares can be converted for the same tax payment, but there are some potential pitfalls,” said Matt Stephens, a certified financial planner with AdvicePoint in Wilmington, North Carolina. 

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Here are three of the biggest Roth conversion errors — and the best ways to avoid them.

1. Failing to consider the ‘big picture’

While it’s easy to make impulsive money decisions, experts say it’s critical to assess your long-term goals before deciding on a Roth conversion.  
“It’s essentially a prepayment of tax,” explained CFP and CPA Marianela Collado, CEO of Tobias Financial Advisors in Plantation, Florida.

You’ll need to compare the break-even point of the upfront levy on pre-tax contributions and earnings to future tax-free growth, she said.
But even if the tax-free growth won’t exceed the upfront costs during your lifetime, a Roth conversion can still be used as a “wealth transfer tool,” Collado said. Of course, this assumes there are heirs to enjoy the future tax savings.

2. Not knowing the ‘pro-rata rule’ 

“The one mistake that seems to be the most common is people not being aware of the pro-rata rule,” which factors your total pre-tax and after-tax contributions across accounts, said Ashton Lawrence, a CFP with Goldfinch Wealth Management in Greenville, South Carolina.
Here’s how it works: Let’s say you have $1 million in combined funds from a few IRAs, and 5% of the balance, or $50,000 of the $1 million, is after-tax contributions. This means 5% of any distribution from those IRAs would be non-taxable and the remaining 95% is taxable, Lawrence said.
If you used $30,000 for a Roth conversion, you may assume there won’t be a tax bill, since $50,000 of the funds are after-tax dollars, he said. However, only $1,500, or 5% of the conversion, will be non-taxable, making 95% or $28,500 taxable, Lawrence said.

3. Ignoring the full tax consequences

While it’s important to plan for the upfront tax bill, there are other possible consequences to consider, according to Stephens with AdvicePoint.
“Converting too much in a single year can push your income into a higher marginal tax bracket,” he said. “For most investors, it’s better to do partial conversions over many years, especially if you can remain in the lower brackets.” 
Retirees need to know how the conversion will affect adjusted gross income, which may trigger higher future Medicare Part B and Part D premiums for a year, Stephens said. 
“This is particularly costly for married couples since both will have higher payments,” he added. More

GM is starting a new business unit to offer electricity storage and management for homes and businesses.
The new unit, called GM Energy, will provide battery packs, EV chargers, and software to help customers optimize charging and ride out electric grid disruptions.

Electric Chevrolet Silverado shown at the New York Auto Show, April, 2022.
Scott Mlyn | CNBC

General Motors on Tuesday said that it is forming a new business unit to offer stationary battery packs, solar panels, electric vehicle chargers and other energy-management products for homes and businesses.
The new unit, called GM Energy, aims to build on the battery and software expertise that GM has amassed in recent years to develop a new line of electric vehicles that will, in time, replace its internal-combustion offerings.

GM Energy will offer products and services for what the company calls “energy management,” including hardware such as batteries and solar panels as well as hydrogen fuel cells and — importantly — cloud-based software that can link these offerings with electric vehicles and utility companies. The products, some of which will be provided by partners, can be tailored for individual homeowners as well as businesses, including companies operating fleets of electric vehicles.
The commercial operations are already underway, while home energy systems will be available starting next year as the 2024 Chevrolet Silverado EV goes on sale.
The goal of GM Energy is twofold: assist the automaker in controlling the customer experience when they purchase a new EV, and create a sustainable business as GM attempts to double annual revenue to $280 billion by the end of this decade.
Travis Hester, vice president of GM’s EV growth operations, said the new business unit offers customers and energy grids “resiliency.”
“If you have a sudden unexpected power outage, then you can use your vehicle or your stationary storage box to be able to power your home or small business,” he said. And the batteries can feed energy back into a regional power grid during a heat wave or other event.

GM isn’t first into this space. Most notably, Tesla has offered charging, solar and energy storage for several years. There are also more traditional competitors such as Generac. Ford Motor is also entering the space.
The total addressable market of products and services being targeted by GM Energy is between $125 billion and $250 billion, according to Hester. He told CNBC that growing concerns about the U.S. power grid make this a timely offering.
Hester said that GM Energy has already signed up a series of partners that will help it deliver products and services and integrate its offerings into the grid. Those partners include solar giant SunPower, which will install GM’s home systems and provide solar panels, and regional utility companies including Pacific Gas and Electric (PG&E) and Con Edison.
“It was really important to us that when we launched this that it was not a plan for the future, but actually something we’re doing right now,” Hester said, adding more partnerships will be announced soon.
PG&E is working with GM Energy on a pilot test of a “bi-directional charger,” which allows an EV to provide power to a home during a blackout. The EVs charge at night when rates are low and potentially provide energy back to the grid during peak hours.
“The business fundamentals behind this are very solid,” Hester said, adding that energy management can save commercial customers hundreds of thousands of dollars a year and provide additional savings, if not income, for consumers.
The companies expect to begin making that charger available to PG&E customers next year.
Ford Motor has a similar deal with PG&E for its electric F-150 Lightning. It also has partnered with Sunrun as a preferred installer of home energy systems. Installations of those systems began earlier this year.

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Many flights that were canceled during the pandemic are returning to the skies this month.
Last week, Singapore Airlines and Scoot announced they’re adding dozens of flights to cities across Asia. Citing strong demand and relaxed border restrictions, both airlines announced more flights between Singapore and Japan, South Korea and Taiwan.

Scoot is bringing back twice-weekly flights to Yogyakarta and Pekanbaru in October too.
Most of the flights are reinstated ones, but Scoot’s adding a few new routes. This month, it will start flying from Singapore to Lombok and Makassar, Indonesia. Scoot is also adding a seasonal nonstop flight to Sapporo for travelers who want to hit the slopes in Japan this winter.
Both airlines are gearing up for more flights to China. Singapore Airlines launched services to Beijing in September; this month, it will start flying to Chengdu, with a second weekly flight going to Shenzhen. Scoot is already flying into four Chinese cities, with flights to Wuhan and Zhengzhou starting this week.

Scoot isn’t the only budget carrier ramping up services in the region. Cebu Pacific is restarting its first international route from Davao to Singapore this month. And AirAsia is resuming several flights between Malaysia and Indonesia, including a new route linking Bali to Penang.
On the heels of Hong Kong’s relaxed border restrictions, Cathay Pacific’s budget carrier HK Express announced plans to add more than 400 flights linking Hong Kong to Singapore, Bangkok and several cities in Japan before the end of the year.  

More flights, cheaper airfare?

James Marshall, vice president of global air at Expedia Group, told “Squawk Box Asia” Monday that limited flight choices for travelers in Asia “was one of the reasons why pricing was quite high.”
“The fact that airlines are increasing their capacity is a very good thing,” he said. But as for whether flight prices are at their peak right now, Marshall said, “It’s very difficult to say.”   

One issue is that the industry continues to struggle with staffing shortages. The Hong Kong Aircrew Officers Association, a professional association representing Cathay Pacific pilots, warned last week that because of lack of staff “air fares will continue to rise due to low supply combined with a high demand” — a situation that will inconvenience Hong Kong for “many years.”
Staffing problems were blamed for the travel chaos in Europe and North America last summer — a problem Asian airlines don’t want to repeat, said Marshall.
“Airlines in Asia-Pacific have been very careful on how they manage the increase … ensuring that they get staffed at the right level so we don’t end up with operational issues that we’ve seen in other regions,” he said.
If airlines remain cautious about adding new flights and demand remains strong — especially with the Christmas travel season closing in — cheaper airfares may not be realized for some time.
“We are obviously optimistic about the opening and decrease of capacity, but the demand is still very strong, especially towards the end of the year,” said Marshall. More

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According to the International Energy Agency, electric vehicle sales are on course to hit an all-time high this year.
The sector’s expansion and other factors are creating pressure points when it comes to the supply of the batteries crucial for EVs.
Stellantis’ electric vehicle plans put it in competition with firms such as Elon Musk’s Tesla as well as companies like Volkswagen, Ford and GM.

This image, from July 2021, shows a Citroen e-C4 electric vehicle on display at a showroom in Paris, France. Citroen is a brand of Stellantis, one of the world’s biggest automakers.
Benjamin Girette | Bloomberg | Getty Images

Stellantis is turning to Australia as it looks to procure the materials needed for its electric vehicle strategy in the years ahead.
On Monday, the automaker said a non-binding memorandum of understanding related to the “future sale of quantities of battery grade nickel and cobalt sulphate products” had been signed with Sydney-listed GME Resources Limited.

According to Stellantis, the MoU is centered around materials sourced from the NiWest Nickel-Cobalt Project, which has been earmarked for development in Western Australia.
In a statement, the firm described NiWest as an operation that would produce around 90,000 tons of “battery grade nickel and cobalt sulphate” for the EV market each year.
Stellantis said that, so far, over 30 million Australian dollars (around $18.95 million) had been “invested into drilling, metallurgical test work and development studies.” A definitive feasibility study for the project is due to begin this month.

Read more about electric vehicles from CNBC Pro

In its statement Monday, Stellantis — whose brands include Fiat, Chrysler and Citroen — referenced its goal of all passenger sales in Europe being battery electric by the year 2030. In the U.S., it wants a “50% passenger car and light-duty truck BEV sales mix” within the same timeframe.
“Securing the raw material sources and battery supply will strengthen Stellantis’ value chain for electric vehicle battery production,” Maxime Picat, chief purchasing and supply chain officer at Stellantis, said.

Stellantis’ electric vehicle plans put it in competition with firms such as Elon Musk’s Tesla as well as companies like Volkswagen, Ford and GM.
According to the International Energy Agency, electric vehicle sales are on course to hit an all-time high this year. The sector’s expansion and other factors are creating pressure points when it comes to the supply of the batteries crucial for EVs.
“The rapid increase in EV sales during the pandemic has tested the resilience of battery supply chains, and Russia’s war in Ukraine has further exacerbated the challenge,” the IEA notes, adding that prices of materials like lithium, cobalt and nickel “have surged.”
“In May 2022, lithium prices were over seven times higher than at the start of 2021,” it adds. “Unprecedented battery demand and a lack of structural investment in new supply capacity are key factors.”

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In April, the CEO and president of Volvo Cars predicted that scarcity of battery supply would become a pressing issue for his sector, telling CNBC the firm had made investments that would help it gain a foothold in the market.
“Recently, we made a reasonably substantial investment with Northvolt, so that we are in control of our own battery supply as we go forward,” Jim Rowan told CNBC’s “Squawk Box Europe”.
“I think battery supply is going to be one of the things that comes into scarce supply in the years to come,” Rowan added.
“And that’s one of the reasons we made that substantial investment with Northvolt: So that we can be in control not just of the supply, but we can actually start to develop our own battery chemistry and production facilities.”
Renault’s charging plans
Monday also saw Mobilize, a brand of the Renault Group, announce plans to roll out an ultra-fast charging network for EVs in the European market. Mobilize Fast Charge, as it’s known, will consist of 200 sites in Europe by the middle of 2024 and “be open to all electric vehicles.”
The development of adequate charging options is seen as being crucial when it comes to challenging perceptions surrounding range anxiety, a term that refers to the idea that electric vehicles aren’t able to undertake long journeys without losing power and getting stranded.
According to Mobilize, the network in Europe will enable drivers to charge their vehicles 24 hours a day, seven days a week. “Most of the stations will be at Renault dealerships less than 5 minutes from a motorway or expressway exit,” it added. More

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It’s that time again! “Mad Money” host Jim Cramer rings the lightning round bell, which means he’s giving his answers to callers’ stock questions at rapid speed.

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Moody’s Corp: “They’re such a good company, but there’s been so little issuance for them to rate to begin with.”

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BlackBerry: “I’ve been against them the whole way down. They’re losing money.”

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Novavax Inc: “I’ve been saying, ‘sell this stock,’ the whole way down. And I’m not done.”

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Monday – Friday, 6:00 – 7:00 PM ET

CNBC’s Jim Cramer on Monday named the biggest losers and winners on the Dow Jones Industrial Average during the third quarter.
“Anything economically sensitive has been crushed and even high-dividend yields are no protection when the Fed is on the warpath,” he said.

CNBC’s Jim Cramer on Monday named the biggest losers and winners on the Dow Jones Industrial Average during the third quarter.
“Anything economically sensitive has been crushed and even high-dividend yields are no protection when the Fed is on the warpath,” he said.

Here are the winners:
Winners 

Walmart
Apple
Home Depot
Disney
Chevron

Stocks have declined dramatically this year due to persistent inflation, the Federal Reserve’s interest rate hikes, Russia’s invasion of Ukraine and Covid-19 lockdowns. The market has remained volatile as Wall Street worries about a potential recession.
As for the losers, Cramer noted that many of them have high dividends.
“In a Fed-mandated bear market like this one … dividends, well, they offer you no protection whatsoever,” he said, adding that high-yielding stocks can be even more dangerous than lower yielders, because a high yield is a sign the company might need to cut the payout.

Here are the losers:
Losers

Intel
Verizon
Nike
Walgreens
IBM

Disclaimer: Cramer’s Charitable Trust owns shares of Apple and Disney.

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Monday – Friday, 6:00 – 7:00 PM ET

CNBC’s Jim Cramer on Monday warned that any market rally will be temporary until the economy cools down.
Markets have been roiled this year due to skyrocketing inflation, the Federal Reserve’s interest rate hikes, Russia’s invasion of Ukraine and recession fears. 

CNBC’s Jim Cramer on Monday warned that any market rally will be temporary until the economy cools down.
“Right now you can get a bounce. Without some more data that shows the Fed’s actually winning the war against inflation, though, rates will keep going relentlessly higher and any rally will … have a very short shelf-life,” he said.

Stocks fell on Monday ahead of the release of producer price index and consumer price index data later this week, which will shed more light on the state of inflation. The Nasdaq Composite’s losses for the year are more than 32% after Monday’s slide, while the S&P 500 is down by more than 24% so far this year.
Markets have been roiled in 2022 due to skyrocketing inflation, the Federal Reserve’s interest rate hikes, Russia’s invasion of Ukraine and recession fears. 
Yet the market still has a ways to go before it will bottom, according to Cramer. He previously said that inflation needs to ease in three key areas for the Fed to stop wreaking havoc on the market.
“Until the market’s viciously oversold, which we aren’t, and we get softer data for wages, for food and housing, you’ve got to treat all of these rallies as head-fakes,” he said.

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Shares of General Motors and Ford Motor each tumbled Monday.
A pair of UBS downgrades cited expectations for weakening demand amid inflationary pressures.
Shares of both GM and Ford are off about 45% year to date.

The General Motors world headquarters office is seen at Detroit’s Renaissance Center.
Paul Hennessy | LightRocket | Getty Images

DETROIT — Shares of General Motors and Ford Motor each tumbled Monday after a pair of UBS downgrades citing expectations for weakening demand amid inflationary pressures.
Ford’s stock was down by more than 8% during intraday trading before closing at $11.37 per share, a decline of 6.9%. GM was off by as much as 7.5% before closing at $32.29 per share, down by 4%.

Both GM and Ford shares are off about 45% year to date. Both companies have a market capitalization of just under $50 billion.
UBS analyst Patrick Hummel wrote in notes to investors Monday that he expects the U.S. automotive industry to be challenging for the foreseeable future following record profit amid low supplies and high demand during the coronavirus pandemic.
He predicted “it will take three to six months for the auto industry to end up in oversupply, which will put an abrupt end to a 3-year phase of unprecedented” pricing power and profit margins for the automakers.
The investment firm downgraded Ford to “sell” from “neutral” and GM to “neutral” from “buy.”
UBS continues to prefer GM over Ford due to its momentum with electric vehicles and fewer problems with production during the third quarter. Hummel said UBS expects a “solid quarter” for GM, which is scheduled to report third-quarter results on Oct. 25.

Ford last month said parts shortages have affected roughly 40,000 to 45,000 vehicles, primarily high-margin trucks and SUVs that haven’t been able to reach dealers. Ford also said at the time that it expects to book an extra $1 billion in unexpected supplier costs during the third quarter.
Ford is scheduled to report third-quarter results on Oct. 26.
— CNBC’s Michael Bloom contributed to this report.

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