Thread regarding AT&T layoffs

I left my 401k with Fidelity two years ago. They recommended moving it out of the ATT plan due to limited investment options and move it to an IRA. 85% of it is in bonds. I’ve been drawing 4% a year and my principle has increased. Very little risk.

1. Take the money and run.
2. Use a financial planner other than Fidelity. They are too close to AT&T and are conflicted.
3. AT&T can sell off the pension plan any time they want to.

You should also speak with a different company, Fidelity is not a "dis-interested" party. Since the purchase of At&T by Southwestern Bell we no longer have an internal benefits group handling pension payments. Fidelity is the company that handles all pension business for the company and if they can get a recurring monthly payment from the company for handling a monthly pension payment to you instead of a one-time fee for the transfer of a lump sum then it is better for Fidelity. They are in business too. Check with some other companies and independent advisors about the pros/cons of taking your lump sum or trusting the company to continue to pay you.

Just keep in mind that under the company monthly payment plan you have only one choice for a survivor benefit and that is your spouse, if they outlive you, otherwise no survivor benefit is paid. If you take a lump sum payment you can direct any amount in your estate to anyone you wish. I think you should know that annuity is a term that is used but is not actually correct for the monthly payment option. They do NOT purchase an annuity in your name, they only agree to pay you an amount as long as the plan is in effect and look at some airlines and U.S.Steel and other corporations for examples of retirement benefits being severely cut or even stopped at the company discretion.

| Just make sure you take the annuity the right way to maximise [sp] the lifetime benefit for you and any spouse, cause payment to you stop upon death and the Pension gets to keep that money. Talk to a trusted financial advisor.

To the first response - An annuity will be based on your actuarial life expectancy. If you live beyond the date the actuaries tell you you're supposed to die, an annuity will pay more by waiting to start it since the payments will be larger. If you die before your actuarially expected death date, the amount you receive will be maximized by taking the annuity as early as possible. There's no winning or losing time to start your annuity if you have no inside knowledge into how long you will live.

One simple way to look at this (you can check rates at https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates):

• Lump sum pensions taken in a given year are based on 3 interest rates (short/medium/long - 1st/2nd/3rd segment) set by the IRS in November of the preceding year. The lower the interest rate, the higher your pension payout.
• The lowest November 1st segment rate ever was November 2020
• The lowest November 2nd segment rate ever was November 2020
• The lowest November 3rd segment rate ever was November 2020
• We are currently in a rising interest rate environment meaning November 2021 rates will likely be significantly higher than November 2020

Leave in 2021. Take a lump sum in 2021. If you want an annuity, take the lump sum and buy your own. Better yet, put some in an annuity and invest some (use a fiduciary for advice). If you're afraid you don't know enough to invest, buy an age fund which invests appropriately for your age (becoming more conservative as you age) or an allocation fund such as AOK (conservative), AOM (moderate), AOR (growth) - just slide the scale to your risk level to choose, index invest in stocks and bonds around the world with automatic rebalancing and fees under .1% (there's other funds out there that do similar) –>
https://www.blackrock.com/tools/core-builder/us#/

Thanks everyone !

@iwc+19EVVVN9, if you can take your pension lump sum, it means you are not employed by T anymore. Can you still roll the lump sum amount into T 401K?

Yes, I did it, any concerns just call Fidelity and ask.

Also, setting up a 3-5 fund investment profile for retirement, with an asset allocation that your comfortable with is really easy. Just ask for a Fidelity advisor (yep zero cost and Fidelity is a fiduciary) and they can help you with the planning tool (Free). Once you understand the tool you can then see how the various options (Lump sum, partial lump, full annuity) play out long term, and provides you with a expected % rate (0-150% success).

You can basically create your own annuity and keep your money with the lump sum. Get educated on this folks, make the calls to fidelity and ask for an advisor!

Of-course you can roll your pension into a 401k or an IRA.

Actually at&t is a company that also lets you back door IRA's as well into your 401k. You can get your IRA money earlier without using a 72t that way and have it all in a 401k. Only drawback on 401k is that you can only BrokerageLink 50% and the other 50% has to be in regular 401k funds. IRA you can invest all as you like.

“ You can't roll all the lump sum into a 401k.”

Yes, you absolutely can.

LEFT OFF SOME INFORMATION FROM THE PREVIOUS POSTING

There is always the option that the Company may terminate the plan. There are two ways they can terminate the pension plan.

FIRST
They can end a plan in a “Standard Termination”, but only after showing the PBGC that the plan has enough money to pay all benefits owed to participants.

Under a standard termination, a plan must either purchase an annuity from an insurance company (which will provide you with periodic retirement benefits, such as monthly for life or for a set period of time when you retire).

Or, if the plan allows, issue one lump-sum payment that covers your entire benefit.

The plan administrator must give advance notice that identifies the insurance company (or companies) selected to provide the annuity. The PBGC’s guarantee ends upon the purchase of an annuity or payment of the lump-sum.

If the plan purchases an annuity for you from an insurance company and that company becomes unable to pay, the applicable State Guaranty Association guarantees the annuity to the extent authorized by that state’s law.

Below are links for issues on the State Guaranty Associations
(each State has their own guidelines, Coverages, Benefit Limits, etc)

https://www.nolhga.com/
https://www.nolhga.com/factsandfigures/main.cfm/location/stateinfo
https://www.nolhga.com/factsandfigures/main.cfm/location/lawdetail/docid/8

SECOND
If the plan is not fully-funded, AT&T may apply for a “Distress Termination”.
To do so, however, they must be in financial distress and prove to a bankruptcy court, or to the PBGC, that they cannot remain in business unless the plan is terminated. If the application is granted, the PBGC will take over the plan as trustee and pay plan benefits, up to the legal limits, using plan assets and PBGC guarantee funds.

If you decide to choose the annuity option below is some information you might not be aware of:

Here is a summary of Pension Plan Options that AT&T (and other companies) have if they elect to default or terminate the plan.

Every year AT&T must file a report to the US Department of Labor outlining the Pension plan financial specifics and health of the pension plans.

There are multiple Pension Plans AT&T provides depending on the affiliate you are employed under. All plans roll up under the Umbrella Corporate AT&T Pension Benefit Plan.

You can find the report at this location. It is a very interesting report to read.
https://www.efast.dol.gov/portal/app/disseminatePublic?execution=e1s1

You only need to enter DATA on these two fields and then perform a search
Enter PLAN Number (PN) as: 006
Enter EIN as: 431301883

A listing of filings will come up and you would review the last plan submitted for the Plan Year.

Also, the company produces a condensed annual report summary for the past 3 years (ANNUAL FUNDING NOTICE for the AT&T PENSION BENEFIT PLAN). This report should be available on the Company Web site (or via Fidelity) under Pension Plan Documents applicable to the plan we fall under and should be showing a summary for Plan years 2017, 2018, and 2019 and updated later this year.

Corporations with Pension Plans pay a Premium to fund the Agency Responsible for Insuring Corporate pension plan. The agency is known as the: Pension Benefit Guaranty Corporation (PBGC).

The AT&T Pension plans are categorized as SINGLE EMPLOYER Plans, (as opposed to MULTI-EMPLOYER Pension Plans)

These sites may also be of interest on the Pension Benefit Guaranty Corporation (PBGC).

https://www.pbgc.gov/
https://www.pbgc.gov/news/testimony
https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee

You can't roll all the lump sum into a 401k. Sorry, it doesn't work that way.

You can roll the lump sum into an IRA. Then, IRAs can be rolled into many 401k plans, if you are still employed and your employer's plan supports that. Many do.

You can't roll all the lump sum into a 401k. Sorry, it doesn't work that way.

i think it also depends what you want to do in retirement. i want to eventually move to a CCRC (continying care retirement community) with a type A contract. They guarantee your care for life. When reviewing finances they like to see pension income as its guaranteed to continue to co.e in every month.

Money is in a trust? Can't be reduced? Google Pension Rights Center and read the blog about the hundreds of retirees (not at&t) that have had their pension annuity's reduced after retirement. AT&T issued a Wireless tracking stock (10 billion) that puts retirees ahead of creditors and bondholders if there is financial default so yes there is some safety. However, they needed the DOL to approve it at the time so they would not have to come up with the 10 Billion dollars to bring the plan up to up to funding requirements. You are out of your mind to take the annuity from this company...............

Remember social security is an annuity. How many annuities do you need?

I definitely take the lump sum and invest.

Hopefully that is not the only investment you have. Most of us have 401ks too. That means even if market goes down, lets say you have a million all together, you can ride the wave by just taking dividends and social security until it gets back to normal levels.

I am getting ready to make this decision myself. It's a difficult one. There is no right or wrong answer. Both choices have advantages and disadvantages based on your personal situation and risk tolerance.

A few things to keep in mind:

Some, not all, financial planners favor the lump sum because they like to get assets under their management so they can charge you an annual management fee based on those assets. If you do go with a planner, it's better to go with a fee-only planner who charges a one-time fee for advice and then you can implement the advice yourself. For example, roll it into the 401k or an IRA brokerage account and invest in low-cost index funds, etc.

The lump sum does allow you the option of leaving money to your heirs IF there is money left when you die. But keep in mind that if you take the lump sum, you will be investing it at all time highs.
Markets (both stocks and bonds) don't only go up. A few bad stock years at the beginning of retirement can be devastating to the lump and severely limit the amount you could safely withdraw each year. The annuity option lets you sleep better at night because you have guaranteed income coming in every month, but it also can be eroded by inflation over time without a COLA.

Solution? I am considering the partial lump sum (one year's pay) and the remainder as the monthly annuity.

Lump sum is the way to go for many reasons. You can roll it to a 401k or IRA Rollover with no immediate tax consequence. You manage it and there are many fairly safe investments with CEFs, Baby Bonds and Preferred stocks to pay dividends and retain or grow your balance to leave to your heirs. Very few people need an annuity beyond Social Security which in itself duplicates an annuity. If you DO need an annuity beyond SS because you saved too little, retired early and/or are worried about running out of money then the low cost annuities can be purchased through overseas (Switzerland, Liechtenstein, Belgium) where laws are better for protecting you and you aren't paying the enormous upfront fees, early redemption fees, can hold in foreign currencies like the Swiss Franc and can borrow against it unlike the US. Foreign brokers can't advertise them in the US but there are plenty of online Swiss banks or you can contact brokers in Canada.

OP is correct about 6% .... you find this out by dividing your annual annuity total by the lump sum total .... little # divided by big # then move the decimal point out in the answer. Mine is usually 6 or 6.5% a year I would need to get from my lump. Has nothing to do with life expectancy. I am still taking the lump for investment control. OP just give your lump to a reputable planner and then when CDs eventually go up have them buy those if it lets you sleep easier.

The annuity ends when you and your spouse are deceased. It does not pass down to any dependents. I’m going with lump sum when I retire later this year.

Annuities aren’t paying jack right now with low interest rates. They get a straight 10% commission on annuities when the sell them. Take your lump and buy a annuity with part of the money!

The advise on annuities does not all come from insurance companies, there are reputable financial planners that do recommend some form of an annuity as an income source, and there are no “fees” with the company pension annuity.

There are things to watch out for with 3rd party annuities.

"Most financial advise today is to have some form of an annuity ..."

Yes, and this advice coming mainly from Insurance companies and the like that sell those annuity products. You pay a high fee for the privilege of them keeping the bulk of the return on your money and providing you a "safe" (read: horrible) rate of return on it. Don't short change yourself and your family by getting into these types pf products.

If you're not comfortable selecting diversified funds in which to invest your money, get with a fiduciary to help you.

Most financial advise today is to have some form of an annuity to generate a steady income source outside of social security, etc. as part of you overall retirement portfolio. This may be in the form of a pension annuity or one you arrange for (buy into) with an outside 3rd party annuity provider.

I myself retired back in 2018 and elected to take the pension as an annuity for that reason and have no regrets. Do your own research in the Pro’s and Con’s of each option and based on you own personal situation for what you anticipate your annual income needs are.

Investing a lump sum into equities does not come with an assurance of steady returns for any given year, only the long term returns for growth.

Good luck!

@iwc+19EVVVN9, if you can take your pension lump sum, it means you are not employed by T anymore. Can you still roll the lump sum amount into T 401K?

OP

"In todays economy that beats the 1.5% bank cd without having to loose 50% in stocks during the next economic crisis? Something to consider I think?"

Yes. No one is advising you to cash out the lump and deposit it in a bank savings account or CD. That would be most unwise. Re: the next economic crisis....let's look at the last one, last year. Stocks took a beating in Feb and Mar...and wound up at least 16% for the year (S&P). Since it's inception the average yearly S&P return is 10%. Some years obviously lower, some much higher.

Another vote for rolling into 401k here for multiple reasons.

Unlike IRA's, 401k's are protected from lawsuits garnishments etc.
AT&T has excellent investment options, with excellent tools for rebalancing etc. provided by Fidelity.
Stable Value = Short term money.
Bonds = 6 year investments.
Total US Stock Market = 10 year investments.
Total International = 10 year stock diversification investments.
You can also dabble in small mid cap for growth if needed.
Ultra low investment fee's.
You can set it up to pay out monthly (systematic Withdrawal payments).

Unless you are horrible with $$$ there is zero reason to take the annuity IMO.
Roll the lump into an IRA.
Cut ties with AT&T.
I recoup my monthly with drawls in safe, varied investments.
Unless you know how long you are going to live the annuity is too risky. ;)

Taking the annuity is not really returning 6%. That depends on how long you live.

Divide the lump sum by the yearly annuity payment and see how long it takes just to get your money back.

Then determine how many years it would take to actually make a 6% gain year over year as if the money were invested in a balanced portfolio.

Take the lump sum. Even with a COLA increase which will be nil, over time inflation -on average - has historically been between 2-3%. With the lump sum you can roll it directly into a 401K or traditional IRA as others have said and invest it any way you wish and this lets you have 100% control and pass it along to any beneficiary you wish.

It all depends on how long you and your spouse plan on living. I took the lump sum and I have no regrets.

OP here.

One reason I am considering the Annuity - in my case the Annuity is paying over6% even with survivor benefit verses what I could get out of the lumpsum.

In todays economy that beats the 1.5% bank cd without having to loose 50% in stocks during the next economic crisis? Something to consider I think?

One good logical reason to take the annuity... inability to manage money, make investment decisions, ride the market ups/downs without panicking, etc.

Most smart financial advisors will recommend that you take that lump sum and do a direct transfer roll over into either your 401K or another IRA (no taxes this way), in order to get that money under your control, so it can work harder for you.

Listen to @ajj below, as they summarize the main reasons nicely.

Also, google Dave Ramsey on topic: https://www.daveramsey.com/askdave/retirement/taking-your-lumps

Take the lump sum and roll it to a 401(k). Reasons:

1) The annuity option is not inheritable. Yes, you can take a reduced payout to provide some measly continuance for a spouse, but the annuity payments cease once both of you are deceased. A 401 on the other hand, goes directly to your heirs. No brainer.

2) The annuity payment is locked in for life. You MIGHT see 1-3% annual CoL increases, but nothing more. Whereas a 401 will increase at investment rates. I took my lump sum last July rather than the annuity payment. Put it into a 401 and have seen a $90k increase in 7 months. Again, no brainer. Just make sure you have triggers and stop gaps in place to protect most of the gain. I honestly cannot think of one good logical reason to take the annuity option.

Just make sure you take the annuity the right way to maximise the lifetime benefit for you and any spouse, cause payment to you stop upon death and the Pension gets to keep that money. Talk to a trusted financial advisor.