Question. How is it possible that $$$ can be taken from our pensions?
Example: If you have 300K in it and suppose 10% taken - that would be 270K. Can AT&T actually take $$$ out of our existing pension?
17 replies (most recent on top)
"So if I'm 59 1/2 and take a $1M lump sum, the government will take 30% of it as income tax anyway?!?"
You have to roll it into a tax deferred IRS qualified plan in order to avoid the taxes. Don't fret, the IRS won't get your money if you take the lump sum and roll it! Just talk with someone that knows what they're doing!
"So if I'm 59 1/2 and take a $1M lump sum, the government will take 30% of it as income tax anyway?!?"
More like 37% effective rate a bit lower. It is counted as income on your taxes.
Fidelity told me I am not eligible for my pension after 25 years with the company. HR won't help. They are good as a brokerage but handling employee benefits is outside their range of expertise and knowledge. Just like Media was outside Stankey's ability to handle.
Roll your lump sum to an IRA when you retire to avoid immediate tax on it
So if I'm 59 1/2 and take a $1M lump sum, the government will take 30% of it as income tax anyway?!?
In response to:
"Is the lumpsum taxed?
What tax paper work is needed?"
If you're 59 1/2 of age you can do what you want with that money. It's considered income so you'll be taxed the normal rate.
If you're younger than 59 1/2 you can roll it over to an IRA and let it sit and work for you until you're 59 1/2. However, another option to withdraw money ( pre 59 1/2) you can do a 72t (IRS rule) without a penalty. You should research and get a financial advisor.
If you are one that will lose 30-40% of your pension, mainly Legacy T, you have until 11/30/22 to leave. Otherwise, you will lose that amount from your pension. Call Fidelity ASAP as time is ticking.
Is the lumpsum taxed?
What tax paper work is needed?
Exceedingly simple and not accurate number wise Example:
Annuity of $500 a month, if the interest rate is 3% then the amount of money that needs too be in the account to pay that out may be $75k. To generate the same $500 a month with an interest rate if 5% the amount of money in the account may only need to be $67k. So ATT does not 'take' money there just needs to be less committed to get the same annuity/pension monthly.
That is why you gotta look at you statements. Banks, companies, government, they all take your $$$ when you are not looking.
Additional comment on:
"The risk of the monthly annuity option is down the road, AT&T having financial difficulties and figuring out a way to reduce its obligations, via bankruptcy or whatever."
The risk not typically mentioned is, once you retire and start your annuity payments, if you were to pass away the next day your spouse will only get half. If you and your spouse pass the pension annuity stops... nothing to pass down to your kids or other beneficiaries.
In short, it's risky either way. Me personally, I'd rather get the lump sum and invest it. If I should pass I can add beneficiaries to pass that money down to.
Here is how I understand this issue: the lump sum figures you see on fidelity's website are not a guarantee of a payout, but a projection based on several factors of what your lump sum might look like when you select retirement. As stated here, the annuity payment is fixed and not affected by changes in interest rates, but the lump sum is a projection of roughly what you'd need to be paid as a lump sum up front to maintain an equivalent monthly payment to yourself compared with the annuity. So, if interest rates are higher, in theory you would need a smaller lump sum at the date of retirement to earn what would be an equivalent monthly annuity payment. The risk of lump sum of course is the ability to manage the money yourself to achieve that. The risk of the monthly annuity option is down the road, AT&T having financial difficulties and figuring out a way to reduce its obligations, via bankruptcy or whatever.
As said, the pension plans are all different. This impacts L-T and L-SBC.
The annuity is not impacted, only the lump the pay to you will be drastically reduced. That leaves more $ in the pension plan.
The Stink is building plans to terminate the pensions. No doubt Stink will figure out a real nice legal way to raid the pension fund after giving you a small pittance!
I think it's the monthly annuity only that can't be reduced. Lump sum has always been affected by the interest rate.
Not surprised in the least that "management" employees have no idea how their retirement benefits may work. Us Union dregs at least have a passable understanding of such benefits and can plan accordingly. Wait a little bit "management" and you will need not worry how to manage your retirement benefits, because when those benefits are ZERO it will be easy to manage.
Does this only apply to what’s labeled as “pension” or also to 401k?
Not all pensions are the same. My pension is a cash pension in fidelity. ATT deposits money every month and it grows every month. The increased interest rates actually produce an increase ( slight) in the monthly amount.
So in my case, the interest rate increase doesn’t negatively impact me at all.
So first, you need to understand your pension plan.
The money isn't really taken. The lump sum is based on the estimated amount that the pension manager (Fidelity) has to hold in order to make the annuity payments. This amount is based on safe, low yield investments like bonds and CDs that are heavily dependent on interest rates.
When the interest rates went up, less money was needed to meet the annuity requirement, so your estimated lump sum will go down accordingly. I don't know if the extra money is givem back to ATT or is held in case interest rates go down later.
The pension is an annuity, a stream of money that pays until you (and if you choose your spouse) die. The lump sum is calculated from the annuity using IRS tables for lifespan and a set of 3 interest rates. If the interest rates go up, the value of the lump sum goes down. The rates AT&T uses come from the IRS as well. For a given year AT&T uses the interest rates from November of the previous year. Since interest rates have gone up so much this year the value of the lump sum will drop if you retire in 2023 vs 2022. About 30% in my case.