As a current or former AT&T employee, you know your pension will be a major retirement life line. What you may not know is what type of AT&T pension you actually have. There are two types, depending on your years of service: a vested pension and a service pension. Those who earn the former have an important decision to make.
Though most will make the same choice, which is to defer their vested pension. We’ll explain why, but first, it’s important to understand how you can earn each type of pension.
DIFFERENCE BETWEEN AN AT&T VESTED PENSION AND A SERVICE PENSION
You become vested in the AT&T pension plan when you: (a) have five* years of service (bargained) or (b) turn 65 years of age while employed with the company, whichever is later. Once you reach either target, you will be eligible for a vested pension.
The service pension, meanwhile, is earned by long-term employees. You are eligible for a service pension if you: (a) have 30 years of service or (b) meet the “modified rule of 75,” which generally states you must reach certain years of service and age breakpoints that usually add up to 75. (For more information about the rule of 75, read “How the Number 75 Affects Your AT&T Retirement Benefits.”)
*Three years of service for management employees
AT&T VESTED PENSION OPTIONS
The reality is many workers don’t stay with AT&T long enough to earn a service pension. Therefore, they receive a vested pension. With a vested pension, you have a choice to make. You can either:
(1) defer it until age 65, or
(2) take it prior to age 65 – but at a substantial discount. For example, if you take your pension at age 58, your pension amount will be reduced by approximately 50%.
Again, your pension is likely a primary source of income in retirement. That’s why it’s better to maximize it by deferring your vested pension. To do that, you essentially do nothing except arrange to start receiving your payout upon your 65th birthday. There is no added benefit to delay beyond age 65.
However, this may not be true in all cases. As we like to say, finance is personal. There may be a reason you need the money sooner. Additionally, when you decide to take your pension, you must decide if it’s more appropriate to receive a monthly annuity or lump-sum pension payout. Considering all the personal factors involved in these decisions, work with a financial adviser who can help determine which options are best for you.
You can learn more by downloading our “go-to guide” on AT&T retirement topics: The AT&T Employee’s Guide to Retirement. CLICK THE BUTTON BELOW. This interactive guide covers all AT&T benefits, with the goal to help you make more informed retirement planning decisions.