Financial Living Blog

What AT&T Employees Should Do with Their AT&T Stock

Dec 27, 2018 8:54:44 AM

Why AT&T Employees Should Sell AT&T Stock2 - imageA common mistake we see when helping AT&T employees plan for the future is an excessive amount of their retirement savings invested in AT&T stock. While it can be rewarding to own a share of a respected company like AT&T, it is risky from a retirement planning perspective.

I wrote about AT&T stock previously in a June 2017 blog. Since then the stock market has fluctuated quite a bit, so I thought it would be helpful to revisit the topic. I believe it provides a good lesson to any investor on the importance and value of diversification.

Simply, when it comes to owning AT&T stock as an employee, you can have too much of a good thing.


If you work at AT&T and invest a substantial portion of your savings in its stock, then most of your financial life becomes dependent on the performance of one company. That includes your current income and retirement income from the AT&T pension and AT&T 401(k) plan. Such a high concentration of your financial well-being in a single company is a high-risk situation.

Think about it. How would your finances be affected if the company goes bankrupt?

Further, a single stock is generally riskier and more volatile than a mutual fund or the broader stock market. Therefore, the greater amount of AT&T stock you have in your 401(k), the more you can expect your investment return to fluctuate.

Consider that AT&T stock underperformed the S&P 500 for the past 1-, 3-, 5- and 10-year periods (shown in the table below). Year to date (through 12/14/18), the S&P is down 0.9% while the AT&T stock price is down 17.66%, including dividends, a difference of 16.76%.

AT&T Stock vs. S&P 500 (as of 11/30/18)

att stock

Source: Bloomberg.

What’s more, since we published my original article (6/8/17), the return for AT&T stock is -15.56%, including dividends, while the S&P 500 return is 12.17% -- a difference of 27.73%!

As an AT&T employee, you should make changes to your 401(k) so that it’s properly diversified. Investment diversification is the investment strategy of owning a wide variety of assets, such as stocks, bonds and cash. It’s the investor’s way of not putting all your eggs in one basket. Diversification can reduce your portfolio’s risk, provide steadier returns and increase your opportunities for earnings.


Before making changes, it’s important to first understand why AT&T employees can end up with large concentrations of AT&T stock.

Sometimes it’s unintentional. The AT&T company match is automatically invested in the AT&T Shares fund, which is 100% AT&T stock.

Also, employees may simply choose to defer some or all their savings into the AT&T Shares fund. Later, they forget or don’t take the time to move funds out.

Another reason is that some people are under the assumption it’s against company policy to move their money out of the AT&T Shares fund, so feel discouraged to do so. In the past, there were restrictions on moving funds out of the AT&T Shares fund, but this has not been the case for many years.


As mentioned, it’s more appropriate to diversify the investment choices in your AT&T 401(k) account. That means selling your AT&T stock and investing in mutual funds. The AT&T 401(k) plan offers a variety of funds to choose from, including U.S. and international stock funds and bond funds. The right mix depends on your specific needs, goals and level of risk you’re comfortable with.

By owning a wider array of investments, your savings aren’t subjected to the performance of just one investment. You can reduce your overall risk but also increase your exposure to growth. To determine what investments are right for you, seek the help of a financial adviser who can help you build a long-term investment plan.

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Dan_McHugh_emailDaniel McHugh is a CERTIFIED FINANCIAL PLANNER™ who provides comprehensive wealth management solutions, such as retirement planning and investment advice, to help clients work toward achieving their financial goals. He is also one of Dave Ramsey's designated SmartVestor investing professionals.

You can learn more about navigating the AT&T 401(k) plan, AT&T pension plan and other AT&T retirement benefits by downloading our free ebook: The AT&T Employee’s Guide to Retirement.


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