Financial Living Blog

Using Your AT&T Benefits and Other Financial Planning Moves to Achieve Retirement Success

Jan 31, 2018 8:55:34 AM

Using Your AT&T Benefits and Other Financial Planning Moves to Achieve Retirement - image Success.jpegWhile every worker shares the same goal – retirement, or financial independence – each journey is unique. Every AT&T employee though, generally has the same AT&T benefits at their disposal that’ll help them get there.

Having served AT&T employees for over 30 years, we’ve had the opportunity to work with some clients from the beginning of their careers to their last day on the job and beyond. Based on that experience, here are seven steps using your AT&T benefits and other financial planning moves that will help you achieve retirement success.

1. Take full advantage of your AT&T 401(k) Plan

Ultimately, consider saving as much money as possible in your AT&T 401(k). But at the very least, try to make the full Basic contribution to maximize the employer match. After one year with the company, AT&T matches 80% of your Basic contribution. (For managers, your Basic contribution is the first 6% of your salary. For most non-managers, it’s a dollar amount based on your banded pay.)

If you make the full Basic contribution, you can save even more in the form of Supplementary contributions. The IRS, however, allows you to save only $19,500 per year, or $26,000 if you are age 50 or older. Most non-manager AT&T workers are also limited to a total contribution of no more than 30% of their pay.

2. Sign up for insurance benefits

One thing that can derail your path toward retirement is the unexpected. A way to keep you and your family from financial loss when things go wrong is with insurance. As an AT&T employee, you may be eligible for certain types of insurance coverage that extends into retirement. What makes sense for you depends on you and your family needs.

Health insurance is a must for everyone. Though, if you’re married, it may make sense to join your spouse’s plan if the coverage and cost options are better.

Once you turn age 65 you are Medicare-eligible, and will have to transition out of AT&T’s retiree health care plan and into Medicare. You will also receive information from Aon Hewitt, AT&T’s health care benefits service provider for Medicare-eligible retirees. Through Aon, you will select a plan that provides supplemental insurance to fill in the areas where Medicare does not cover you.

While employed, you may also be eligible for basic life insurance coverage through AT&T. For most employees, basic life insurance coverage is equal to one year of your compensation. If you need additional coverage, you may purchase supplemental coverage through AT&T’s group plan. How much life insurance you need depends on personal factors such as your familial situation, age and financial obligations.

3. Get a financial plan

Perhaps nothing can give you more confidence in the future than a detailed plan. A financial plan can merge all your financial resources -- in this case, your AT&T benefits -- and show how to use them collectively to achieve your goals.

It can provide a feeling of financial confidence that will last. A Franklin Templeton retirement survey found that of those who have a written retirement-income plan, 91% are confident with it and 92% are happy with it.

4. Know when you’re eligible to retire from AT&T

When you retire is a key contributor to having a comfortable retirement. If you retire too early, you could miss out on much needed income. This is especially so for AT&T employees.

You’re eligible for a vested pension benefit after five years of service. But your benefit will be negatively affected if you do not meet both certain minimum age AND service breakpoints for your employment position. (This is commonly known as the modified rule of 75 since the combinations add up to 75 in most cases.)

Another thing that may affect when you retire is the Composite Corporate Bond Rate. This rate is used by AT&T to calculate pension payouts (until 2012, the company used the GATT rate). Even small changes in this rate will impact the size of your lump-sum pension. Generally, when rates are lowered, lump-sum payouts are increased (and vice versa). Therefore, if you’re close to your desired retirement age and the rate drops, it may be a good time for you to consider retiring early.

5. Determine if a lump sum or monthly payout is best for you

The biggest decision you will have to make in regards to your AT&T pension is whether to take it in one lump sum or as a monthly annuity. There’s pros and cons for both options.  For example, with a lump-sum payout, you have full control over how you invest and use the money. The downside being that your money is then exposed to market risk. Meanwhile, a monthly annuity provides lifetime income, but with no cost-of-living increases. Which payout is right for you depends on your entire financial situation, including your 401(k), Social Security, real estate, etc.

6. File for Social Security

Social Security, as a primarysource of income in retirement, is part of your “three-legged stool” for retirement, along with your AT&T pension and AT&T 401(k). The appropriate age for you to start receiving benefits depends on your personal situation. Factors such as work earnings, divorce, remarriage, the death of a spouse, disability and more can greatly impact your benefit and claiming strategies.

Anyone with a minimum of 10 working years qualifies for worker’s benefits. You can re­ceive your full Social Security retirement benefit upon reaching your Full Retirement Age (“FRA”). Your FRA depends on your year of birth. The FRA for most people working today is from age 66 to 67. You can, however, claim a reduced benefit as early as age 62.

If you take Social Security early, your benefit is permanently reduced for each month taken before your FRA. For example, if your FRA is age 66 but you claim Social Security at 62, then your benefit will be reduced by 25% (30% if your FRA is 67). As individuals work and wait to file beyond their FRA, they receive a delayed credit added to their benefit. After FRA, Social Security benefits increase 2/3% per month (8% per year) until age 70.

7. Figure out what you want to do in retirement

Retirement planning isn’t all about money. It’s also about time. How you spend your time in retirement will dictate your happiness. Are you mentally and emotionally prepared for the wealth of free time retirement provides?

This may not be as easy of a question as you think. The transition into a retirement lifestyle can be a challenge. After all, you’ll likely still feel accustomed to the structure of working a full-time job. Therefore, it is important to plan what you’ll do with your time in retirement before you retire.

You can learn more about your AT&T benefits and how they can help you reach retirement by downloading our go-to guide on AT&T retirement topics: The AT&T Employee’s Guide to Retirement.

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