I anticipate seeing my lump sum drop 20% when segment rates reset in November. I’ve already hit “modified rule of 75” and was planning on leaving in next 3-4 years. Just curious if many will leave this year in order to lock-in the high lump sum. It’s an easier decision if I was leaving in next 2 years. I have no intention of taking annuity. Thoughts?
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My lump sum down 20%+ with updated segment rates that were announced today. Not sure I want to work for 70% pay-cut during next 2 years.
I’m mid fifties and was Rule of 75 last year. I could have left and received the subsidized medical for next 10 years. However, the subsidy it is only valued at approx $15K per year. In the big scheme of things that isn’t much. And I
would still have to pay the absurd deductible, etc. And I agree with earlier poster that many will leave this year before lump sum drops 20%. And company won’t have to offer severance to get rid of us “expensive old timers” (aged 50+). Of course we all received the big lump sum jump 3 years ago when interest rates bottomed out.
If you are in management and we’re MR 75 eligible last year that could very well turn out to be a costly mistake if you plan on taking the lump sum with no subsidized health care
I heard about 5 people kicking themselves for not leaving last year and based on the numbers they are telling me they plan to leave this year before Nov. Unfortunately, I do not have as many years and need benefits and I like my job so I hope to be here a few more years or longer as not as old as the folks I spoke with.
To the previous poster: yes and yes. The company may very well see a tidal wave of voluntary retirements this year for that very reason and believe they are quite aware of that
Previous poster: Will the 20% impact your retirement date decision? If so, I’m guessing you were thinking of retiring in next <3 years or would find another job elsewhere?
For the poster who doesn’t think the lump sum would decrease by 20% even with a two point rate increase should rethink that. There are other factors at work besides interest rates. Corporate bond yields also influence segment rates as well and my lump sum is already down 13% as of March and that was with only one small rate increase. I can easily see it going down 20% or more
In general, each 1% increase in rates, decreases the lump-sum by 8%-12%. I’m in mid-50’s and the 2nd segment is the most impactful. It represents approx 80% of the change in my lump
sum.
To earlier poster: To isolate the decrease caused by rates, a scenario needs to be run with commencement of 1/1/23 or later. That would utilize the 3 estimated rates that you would enter. Any commencement with date of 12/31/22 or earlier will revert to the November 2021 rates.
I left 13 months ago and had 26 years and age 55. The first segment rate seemed to matter most for my situation. I just looked a couple days ago out of habit and the new 2.44 rate would have hammered me, it's almost 5 X higher than mine was. People do not even consider rates at at&t and just go about their lives working. You could in essence be working for free for a year by the time you lose 20% of your pension and drive back and forth everyday. Really something to crunch the numbers on. The rates are only going to get worse by November, so plan accordingly.
This is only a guess but I think you might be using the interest rate part of the retirement calculator wrong. A 20% drop for your lump sum in one year sounds way too high even if the interest rate went up 2 full points, which is not planned. If that is where you are getting your 20% figure read the instructions carefully on the fidelity site, it is not as simple as just plugging in the interest rate, the figure you should input is the DIFFERENCE between the existing rate and the anticipated new rate. That is why the + or - sign is used in that space. Read those instructions several times, I think your input might be incorrect. If nothing else call fidelity and ask them to do it and email it to you just to be certain.
Any Mobility SE hire from 2011-2015 doesn’t have a lumpsum option anyway
$10K that I can’t touch until given an lumpsum option. Or take annuity at $47/month
Glad I don’t work at that cesspool anymore
Public service announcement- If you leave this year and want an annuity, you are much better off taking the lump sum and using the money to buy an annuity from a AAA insurance company. This is an anomaly due to this years rates. Check with your financial advisor.
“To the previous poster:
My lump sum is greater than 401K. It’s easy to say I can work 3-4 more years and continue receiving the high salary, 401K match, etc…..However, what happens if you get laid off?…”
Good point. It looks like your pension may be significantly higher than mine. (I know they vary based on what company everyone started with.) So it does make sense to consider the risk of layoff and for each person to run their numbers under different scenarios/separation dates in order to make an informed decision and decide what works best for them.
“How exactly does this work? AT&T resets the rates in Nov based on IRS data. Does the change go into effect in Nov 2022 or Jan 2023. I am retiring in Dec and not sure if the current or revised rate will apply.”
I’m Legacy T craft and you need to retire prior to 11/30 this year for 2021 segment rates you won’t know what the final segment rates for 2023 are until late in December (which will reflect November rates) and by then it will be too late but you will have a very strong indication what they will be looking forward by August - September. Prepare accordingly
Just thankful that the company has pension. Pensions have gone way of the dinosaur.
Anyone within 3 years of retiring will need to run the pension numbers no later than next 4 or 5 months. If I was a betting man, the tide is about to swing to the annuity option come 1/1/23.
Mine is already down 80K as of March and wouldn’t be shocked in the least if it dropped another 20K when April segment rates hit at the end of the month. June’s segment rates will reflect the .50 rate hike earlier this month which will be even uglier. Definitely not looking good for the lump sum this year. Just turned sixty so waiting for the segment rates to readjust downward over the next couple of years may be a fools game
To the previous poster:
My lump sum is greater than 401K. It’s easy to say I can work 3-4 more years and continue receiving the high salary, 401K match, etc…..However, what happens if you get laid off? The drop in lump sum could be $200K by the time the November 2022 rates reset for all of 2023. Thus staying until 1/1/23 could prove costly. And even if I make it 3 more years (without layoffs), I would effectively be taking $66K pay cut over next 3 years ($200K drop in lump sum divided by 3). Of course there is the chance that rates could drop back to old levels, but not likely.
“If you plan to stay another 3 or so years, don’t worry about it today.”
I’m of the same mindset. I am staying in order to keep receiving my salary as well as to keep contributing to my 401k (plus match) and to social security. My pension is significantly less than I will get from my 401k and SS so am not basing my decision of whether to leave/retire based on my pension balance. (When the time comes, l plan take the lump sum if that’s still an option.)
How exactly does this work? AT&T resets the rates in Nov based on IRS data. Does the change go into effect in Nov 2022 or Jan 2023. I am retiring in Dec and not sure if the current or revised rate will apply.
Pensions are taking a large hit due to the stock market dropping. To stay funded at even the lowest allowed percentage will cause capital that was allocated for growth to be shifted over to cover the pension obligation. Less capital for growth results in lower head count.
Not to be morbid, but if you pass away before taking the lump your survivor only gets half. Believe it or not.
If you plan to stay another 3 or so years, don’t worry about it today.
Just be thankful you didn’t take lump
sum in Dec 2021 and now see that it’s dropped 15% in this stock/bond market. Better to let it sit under mattress at the company. Risk free.
JG Wentworh
Regarding prior post, I’m guessing they won’t have to eliminate lump sum to get people to leave. The resetting of the segment rates later this year will cause people to jump ship. Also, I don’t anticipate any retirement offers that would force the company to pay a penny of severance. Severance isn’t needed to stimulate retirement. The segment rates resetting will take care of that.
Next purge will be caused by setting a date for the removal of the lump sum option. In doing this the company will purge more of the senior employees that want this option. It is another way to not have a layoff and get fresh talent into the workforce. The ones that stay will get the privilege of the extra work load while the replacements learn on the job.
Anyone who was thinking of leaving in 2023 should leave this year if rule of 75 and legacy SBC. The other pensions are not as clear. If you are planning to work another 4 years you will need to accept the lower lump.
Leave this year with higher lump sum and come back as a contractor for a few years!
Don’t let the size of the lump sum dictate how long you remain at ATT. Annuity continues to grow and isn’t impacted by interest rates. Best to stay and get salary+benefits, then decide on lump or annuity when you are ready to retire.
Yes!!!!
Wondering how the 2021 retirees are faring after putting their lump sum in diversified portfolio over last 5 months. With the drop in stocks and bonds this year, they probably saw their $750,000 drop to $650,000. FYI: I anticipate many active employees leaving this year (for the elevated lump sum). For active employees that want to stay 3 or fewer years, they will be working for 50%+ pay cut (after taking into account lump sum drop).
As you mentioned the company uses the segment rates set in Nov. The rates in general are set monthly. The monthly segment rates are listed on the IRS website. Google IRS retirement-plans/minimum-present-value-segment-rates. The segment rate for March 2022 is 2.44 / 3.71 / 3.94. In Fidelity run a report with a retirement and collection date for this year. Add a scenario and set the retirement and collection date in Jan 2023 using the above March rate. Compare this years figured to next. Only expect the segment rates to keep climbing until the November rate is set resulting in a larger reduction of the lump sum for 2023.
Yes, many will leave because of this, which is OK with upper mgt.