Key Dates:  July 31, 2019 – September 25, 2019 — This is the DECISION WINDOW.  OCTOBER 2019 — I BELIEVE THIS IS WHEN YOU GET THE LUMP…. I’m working on confirming this, but this is what I read in the initial notice sent out.

Click here to download the AT&T Pension Buyout Information Mailer July 2019

My advice is — don’t rush the decision!   The decision window is 7/31 – 9/25 so there’s plenty of time to breathe, do some research, and make an informed decision.  It’s a big decision with pros and cons ,on each side.  

Your Immediate Options:

  • Take the lump sum and roll it over to a qualified retirement plan.   This can be your AT&T 401K plan (if you still have it, many people roll this over to an IRA to get more investment choices), an individual IRA, Annuity or other qualified plan, or you can also roll it over to another employer’s 401K plan if you are a participate (say you got a new job at a new company, and now you have a 401K with them).  But again, rolling over to a 401K has some distinct disadvantages — namely severely limited investment choices, the other big one is that the tax laws are not favorable for your beneficiaries if you die with your money in a 401K — they have to take distributions and basically withdraw the money in a few years…. so they pay tax on that money.  If that same money was in an IRA, your beneficiaries have more time to withdraw the money (and therefore smaller annual tax burden on that money).  Unless you plan on taking withdrawals at age 55, I personally see no good reason to keep your money in a 401K after losing a job.  An IRA gives you more investment choices and some firms even pay you money to move your account to them.  This was the case for me and my annuity at New York Life.  I got 4% of the balance of my account that I moved to them deposited into my annuity account, which was immediately investible (meaning, that bonus money could be invested immediately, and therefore earn me money.)   So you do need to shop around to see what offers are out there.
  • Take the lump sum as a distribution – cash paid to you.  WARNING – they’ll withhold 20% of that money for federal income taxes. State and local taxes might also be withheld.  So you’ll pay income tax on the pile of money AND if you take it before the age of 59.5 there may be additional taxes and penalties.  This doesn’t seem like a solidly useful plan for anyone other than maybe someone terminally ill. 
  • Leave your Pension with AT&T in the Pension Plan, and plan to receive lifetime monthly checks – starting when you decide to start your retirement distributions.  The amount will be reduced if you start before retirement age of 65 vs. if you wait.  This is simply because if you start taking pension distributions at aged 59 and you live to 90, you will have collected for a longer period of time, so the monthly amount is reduced.

AT&T will be providing information at some point soon on how and where to access the “Pension Choice Website” which will be open 7/31 – 9/25/2019 and will be where everyone can review their personalized lump sum along with “additional resources” whatever they mean by that.  This website is also where you’ll make your election on whether you want the lump sum or not.  Married people – to take the lump sum, you need to have your spouse sign a consent form since by taking the lump sum, you’re automatically giving up the “spousal survivor” option where IF you take monthly annuity option, you can choose to have your spouse protected – you get a lower monthly payment in exchange for your spouse receiving your pension payments (discounted of course) after you die.  [in general, a smart option to consider is to NOT take the spousal survivor option so you get the maximum pension check each month, then, with the extra $$ in your pension check – just buy a good life insurance policy for your spouse because the amount they’d collect with that policy is likely larger than what they’d ever get via the leftover pension payments.]  My husband sets this up for clients all the time.  Life insurance is the most mis-understood, financial product out there.  It can be great and SO smart because cash from life insurance policies is not subject to income tax.  So you can use special life insurance policies to save for kids college (if you buy a policy on them when they’re babies) by the time they’re ready for college you can use the accumulated cash value to pay for college AND it won’t disqualify them from receiving financial aid (like a 529 plan will) because it’s life insurance money.  But I digress…. I don’t normally get excited about life insurance, but I’ve learned much being married to Lou!

THE FIDELITY SERVICE CENTER WILL NOT BE ABLE TO TELL YOU WHAT YOUR LUMP SUM OFFER IS UNTIL 7/31/19 

and lets hope they’re staffing up over there in those call centers, eh?!  🙂  But I believe we should be able to get our lump sum amount on the decision website and probably on https://netbenefits.com

I am expecting that AT&T will be pushing for the “fast, easy” solution for those who want to take the Pension Lump Sum — “Roll it over to Fidelity” and my FB page post explains why I expect to see that…. I like Fidelity, they have nice people on the phone and whatnot…. but remember – they are a bank, they’re part of the financial industry that includes banks and insurance companies.  They’re all trying to get more customers.  They’re all  all competing for business in financials, so don’t just do the easy thing.   Shop around for what’s best for you!  If you’re my age or older, you remember the days when local savings & loan banks would give out gifts if you opened an account with them — toasters were popular as were drinking glass sets, whatever the gadget of the day in the 70’s was.  Well, don’t expect a toaster or instant pot from any bank, but they do have “offers.”  So keep an eye on that.

As a side note – this is one good reason to work with someone who understands it all and is in the industry. The hard part is finding someone if you don’t already know someone.  

Full disclosure here —  so my husband is in the finance industry. He’s a licensed agent and can offer products from a wide variety of companies.  He’s worked with many of the AT&T folks already, and while he makes me crazy leaving his coffee cup all over the place, you won’t find a more logical, smart and honest guy to help you with all this.  So no pressure, but if you want some help with planning and executing your strategy on the pension or 401K or insurance or annuity, working with him would be better that picking someone off google, or getting assigned the “next guy available on the line” at fidelity.  And of course, you guys know me from my work with the T-space community for laid off folks, the Facebook and Linked In groups.  So you know you can always hit me up with a question and I’ll get you an answer from an expert (my husband and/or his colleagues – he’s got access to resources over there….)  Medicare, Social Security, Insurance Long Term Care, and of course Rollovers or General Financial Planning.

I’m scheduling an info session – my husband has done this before — both live and via video conference — to explain some of the more technical ins and outs of:

  • Factors to consider when making the decision to pull the pension lump sum out
  • Options for rollovers and a much more exhaustive list of the pros and cons than I listed above.
  • Tax implications and strategies to maximize the amount of money you keep in your own pocket
  • Any special offers he’s aware of 

What I’m interested in finding out about is what the composite corporate bond rate (CCBR) will be in October which is when I believe distributions/rollovers would take effect.  I’ve checked the IRS website and they haven’t posted the CCBR since December 2017??? What’s up with that?  I need that number!!!

If the CCBR goes down, the value of the lump sum goes up, and if the CCBR goes up, then the value of the lump sum goes down.  What I’m still researching is whether or not the CCBR follows the same path as the Fed Rate changes – while from 4Q18 until now, the market was speculating that the Fed would raise interest rates, but now from what i’m hearing, they plan to lower interest rates.  So if the CCBR follows the general interest rates, a reduction would be an added plus on the side of “take the lump sum.”

 If you’re interested in attending the webinar, you can sign up here. (The Go To Meeting link coming soon!!! I got locked out of my account….. darned passwords!)

Rollover Learning w/Lou

So that’s Lou down there (image below)…. Looking pretty snappy in his corporate headshot I did for him.  🙂