AT&T employees who are nearing retirement have a lot on their minds right now. For one, you could lose a significant amount on your pension lump sums if it is calculated based on currently higher interest rates. In addition, you are faced with high market volatility and the potential for a recession.
None of which means you can’t retire comfortably as an AT&T employee. However, you may want to think more carefully about when you retire from AT&T. The rise in rates in particular may motivate some employees to retire earlier than planned.
So, does it make sense to retire sooner or later?
Certainly, now is a great time to explore your options. There are many factors to consider before you decide, such as your 401(k) savings, Social Security, marital status and other income sources.
With the goal of a comfortable AT&T retirement in mind, here are some resources that cover important considerations in detail before you make a decision.
How your AT&T pension is affected by higher rates
In a rising rate environment, you may want to retire sooner and take a larger pension before the rate hike locks in lower pension payouts the following year. Or, you may want to consider working a little longer with the expectation that rates eventually decline and your pension payout increases along with the benefit of extra years of service.
You are eligible for a vested pension benefit after five years of service, but your benefit will be negatively affected if you do not reach the age and service breakpoints for your employment position. Additionally, you may receive a reduced pension benefit if you take your benefit prior to age 55, unless you are a union employee with 30 or more years of service.
Further, employees can elect to receive a monthly payout like a traditional pension or a one-time lump-sum benefit. There are pros and cons to each payout option.
There are four things you can do with a former employer’s retirement account. You can: (1) keep it; (2) transfer it to your new employer's plan, if you change jobs and it’s allowed; (3) withdraw the entire balance in cash; (4) or carry out an IRA rollover, which is the transfer of funds from your 401(k) account into a traditional IRA or Roth IRA.
For many retiring AT&T employees, there are benefits to a 401(k) rollover.
As an AT&T executive, you have compensation benefits that are unique. For example, the deferred compensation plan, restricted stock units and performance shares. Therefore, you need selective strategies for maximizing those benefits and planning for retirement, especially in today’s fluctuating market and uncertain economy.
Previously, upon reaching Medicare age, retirees received an AT&T Health Reimbursement Account (HRA) funded each year with $2,700 and $1,500 for their spouses in a separate account. Now, anyone who retires today no longer qualifies for this benefit once they are eligible for Medicare. Healthcare costs can vary by individual and are difficult to predict, which is why it’s important to have a plan.
Do you want to retire before you’re eligible for Medicare?
Unfortunately for AT&T managers, AT&T eliminated the Pre-Medicare Subsidy, which helped cover a portion of your healthcare premiums in retirement. But, this doesn’t have to mean you’re stuck paying more out-of-pocket. There are still ways to manage healthcare costs in retirement before you become eligible for Medicare, such as finding coverage through a health care exchange and reducing your premiums.
Although Social Security is not an AT&T benefit, it will be one of your key sources of guaranteed retirement income, along with your pension.
The size of your Social Security benefit is greatly determined by your age when you claim. You can receive your full Social Security retirement benefit upon reaching your Full Retirement Age, which is age 66 or 67, depending on your date of birth. But you can claim a permanently reduced benefit as early as age 62. Delaying Social Security until age 70 entitles you to a higher benefit of up to 8% per year. A benefit at age 70 will be 76-77% higher than the payout if you start at age 62.
Ultimately, factors such as your other income sources, marital status and health should guide your decision, not just when you can get the biggest Social Security paycheck.
Upon your death, your spouse is eligible for an AT&T pension survivor benefit. The AT&T pension survivor benefit works like this: If an employee passes away before retiring, a spouse automatically receives 50% of the monthly annuity or can choose the lump-sum equivalent. This option is only available to spouses.
Also, all the AT&T benefits you have earned and accumulated, such as life insurance and your 401(k), can be passed on to a beneficiary in the event of your death. Chances are, if you’re married, your spouse is the listed beneficiary on your AT&T 401(k) account. While not technically a survivor benefit, it is still a potentially sizable amount of money owed to your spouse.
While employed, you may be eligible for basic life insurance coverage through AT&T. That means it is provided and paid for by the company. For most employees, basic life insurance coverage is equal to one year of your compensation. If you need additional coverage, you may purchase supplemental life insurance coverage through AT&T’s group plan. This is a cost-effective way to get access to additional coverage.
All of these considerations add up -- and are too important to simply wing it. Every AT&T employee’s situation is unique, even if their benefit options are alike. Instead of going on guesswork or simply following what your co-worker does, we would be happy to help you with a free financial plan from an AT&T-experienced financial adviser.