Although AT&T employees are provided a pension, the ability to retire on your terms depends greatly on the health of your 401(k). The AT&T 401(k) plan allows you to grow your savings for retirement. Unlike the pension, however, you do all the legwork.
Some AT&T shareholders received an estimated 0.24 shares of the new Warner Bros. Discovery (WBD) stock for each share of AT&T common stock held
Even AT&T employee who are not impacted should consider it a good time for a 401(k) review
Owning too much AT&T stock may be risky from a retirement planning perspective
While it can be counterproductive to constantly check your 401(k) balance and make frequent investment changes, so can simply setting and forgetting it. A periodic review of your account can help you stay on track toward your financial goals.
With the recent WarnerMedia Discovery deal, now is a good time for many AT&T 401(k) participants to review their accounts. That’s because the deal created some changes that may impact accounts.
So, let’s look at the importance of an AT&T 401(k) review in light of recent changes.
Overview of AT&T 401(k) changes
The WarnerMedia Discovery deal resulted in AT&T shareholders receiving an estimated 0.24 shares of the new Warner Bros. Discovery (WBD) stock for each share of AT&T common stock held. The AT&T Shares Fund, which holds shares of AT&T common stock, also received an estimated 0.24 shares of the new WBD common stock for each AT&T share of common stock held by the fund when the deal officially closes.
To make these changes, there was an administrative adjustment process lasting a few days after the deal closed. This is sometimes referred to as a “blackout period”.
During the blackout period, participants were unable to direct or diversify the assets invested in the AT&T Shares Fund or the new Warner Bros. Discovery Stock Fund. There is a risk to holding substantial portions of your assets in the securities of any one company, as individual securities tend to have wider price swings than investments in diversified funds.
For this reason, it is a good reminder for you to review and consider the suitability of your current contribution amounts and investments in light of your inability to direct or diversify those investments during the blackout period. Preferably, with the help of an AT&T-experienced financial adviser.
What to review in your AT&T 401(k)
Here are some of the major benefits a 401(k) review can provide:
Make sure your AT&T 401(k) investments match your goals
If you haven’t checked up on your 401(k) in a while, it’s a good time to do so. Strong market returns over the past couple years could mean your account is more stock heavy than you want. More stock in your portfolio generally means more risk and more volatility.
If that’s the case, you may want to sell some of your investments that have outperformed and buy some of what has underperformed. This is known as rebalancing. It allows you to capture some of your “winnings” while realigning your account with your risk tolerance and financial goals.
Determine the right AT&T 401(k) contribution amount
While you’re checking out your 401(k), review how much of your salary you managed to save and invest last year. A good rule of thumb is to save about 10-15% of your salary. Of course, it won’t hurt to save a higher percentage if you can. For 2022, 401(k) contribution limits have been raised to $20,500 for people under age 50 and $27,000 for people ages 50 and older. At the very least, you should make the full Basic contribution to maximize AT&T’s employer match. That’s free money!
Evaluation of your AT&T stock holdings
While it can be rewarding to own a piece of a respected company like AT&T or WarnerMedia Discovery, it may be risky from a retirement planning perspective. Again, individual stocks can be riskier and more volatile than a mutual fund or the broader stock market. 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.
A plan for what comes next
What do you plan to do with your AT&T 401(k) when you retire? If you retire from AT&T in the year in which you turn age 55 or older, you can withdraw funds from your 401(k) without having to pay an early withdrawal penalty (10%) to the IRS. Should you retire prior to the year in which you turn age 55, you must wait until age 59 ½ to make penalty-free withdrawals. If you roll over your AT&T 401(k) account to an IRA, the age 55 provision does not apply. You must wait until age 59 ½ to withdraw funds from a traditional IRA without early withdrawal penalties.
Get a 401(k) review from an AT&T-experienced financial adviser
To ensure you’re doing all the right things to achieve a comfortable retirement, work with an AT&T-experienced financial adviser. An adviser can help you put together a plan that takes into consideration your assets, target retirement age, desired lifestyle and expected life span. Every AT&T employee’s situation is unique, even if their benefit options are alike. Instead of investing on guesswork or simply following what your co-worker does, we would be happy to help you with a free financial plan from a professional financial adviser.