When will the reduction in pension estimates be up to date on the Fidelity site? I looked yesterday and my estimated amounts went up by quite a bit from last time I’d looked in 2020. Does anyone know the exact percentage it will go down if you retire after 2021?
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Thank you all, especially @byp+18StiynB!
The "Updates to your retirement benefits" email they sent me says (in part):
"* The CAM formula will use a percentage of 1.0% times Pension Compensation paid on or after 1/1/2022. The current 1.6% will still be applied to compensation paid prior to 1/2022."
I had been thinking of taking the annuity, because I'm not investment-savvy, and just hoped to have a lifetime pension for this part of things.
But, if I take the lump-sum, is it reasonably likely that I can find an annuity from someplace like Fidelity for the lump-sum money that will provide me and my wife a similar monthly benefit, or are they shorting us on the lump-sum->annuity amount?
I know, your situation is likely different, and "ask the benefits people," but your experience is likely more informative than the more "official" support, so I appreciate anything you guys hit on your own way out the door.
to: @1tjb+18StiynB
- Fidelity Website says new calcs for 2022 will be available on Feb 19th. They suggest running scenarios now and saving them to compare.
Remember - if Fidelity is giving you a number for 2022, they're only adding in the new (lower) company contribution for 2021, but still using the Nov-2020 interest rates that only apply to 2021 retirements. It's extremely likely that the difference in interest rates between Nov-20 and Nov-21 will have WAY more affect on a 2022 payment than the company putting in a few percent less of your salary in one year.
Fidelity Website says new calcs for 2022 will be available on Feb 19th. They suggest running scenarios now and saving them to compare.
To answer the OP's question of when the new models will be loaded to reflect the reduce company contribution, they said sometime at the end of January, and that you'd get an email telling you it was ready.
Personally, I took the money and ran - exit date in 2020 / lump sum pension on 1-Jan-2021 and not looking back
Same here, last day in July 2020, elected lump sum on December 16th 2020 for a January 1st 2021 start date. Got the lump bump deposit into fidelity qualified account on January 6th 2021. Easy peasy
glad I am not relying on att pension anymore. anybody that is I would recommend trying to get a payout and get rid of att they will come after it eventually.
Here is my understanding of what drives the value of your lump sum (if you decide to take it instead of an annuity).
The lump sum uses 1) the value of your annuity (the amount you are promised each month/year until you die), 2) the IRS segment rates published by IRS in previous November (11-20 in this case), and 3) how long they expect to pay that annuity.
Each year you work, AT&T adds a small % of your salary to the value of the annuity (I think it was 1.6% when I was working there). I think AT&T recently reduced this contribution.
There are 3 IRS rates representing expected short (roughly 20 years) rates.
There is also a mortality table which shows your expected life span.
So your levers for calculating the lump sum are amount of annuity (how much AT&T has contributed to your pension over the years), the interest rates, and how long they expect you to live.
To calculate the lump sum they use the Present Value formula to come up with three present values (short term for roughly first 5 years, intermediate term for roughly year 5-20, and long term for your remaining years)
There three levers mean
1) AT&T contributing less will lower your annuity, but difference will be relatively if you only have a few years left.
2) Lower interest rates are good for you because the Present Value (lump sum) needs to be higher to produce expected annuity. Conversely higher interest rates are bad for you. We had very low historical rates in November 2019 which bumped up lump sum payouts in 2020 and we had even lower interest rates in November 2020 which will bump up lump sum payments for those who decide to cash out in 2021. If you are going to retire at the end of this year, just keep an eye on the IRS segment rates. If they are going up you want to make sure you take your lump sum in 2021 using November 2020 rates. If they go even lower you can retire in 2021 to keep benefits, but defer your lump sum payout to early 2022.
3) Your expected life span is another factor. A 50 year old and 60 year old with same annuity will get a different lump sum because the 50 year old would be expected to live longer.
Keep in mind that if you retire and defer the lump sum for several years, AT&T will not be adding anything to the annuity and you will be betting older, so the interest rate is your only lever.
I hope this helps.
What you are seeing at Fidelity is an update in interest rates for 2021 based on the Nov-2020 rates (see rates at https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates / usually updated at about the 15th of the month)
There's no change to your current pension, so if you put in a 2021 date now versus a few months ago, you're simply seeing the difference in the lower Nov-2020 vs Nov-2019 interest rates (lower rates = higher lump sum).
What AT&T has done is reduce the amount of money they will add to your pension annually so your future pension (if you stick around) will grow slower as their annual deposit to your account will shrink.
Personally, I took the money and ran - exit date in 2020 / lump sum pension on 1-Jan-2021 and not looking back