Could One Day Cost AT&T Employees $200K?

It may seem crazy but there are likely people at AT&T who will cost themselves $200,000 in their retirement because they retired too late. In some nightmare scenarios, this could be just one day too late. Interest rates have risen by over 2% since last November which will have a massive impact on the lump-sums of AT&T employees. Many employees who are nearing their retirement date have $1,000,000 or more in their current lump-sums. The downside is that those who do not leave the company in 2022 will stand to lose 20% or more!

When interest rates rise by 1% lump-sums typically are reduced by about 10%. AT&T calculates their employees’ lump-sums by using the November IRS segment rate from the previous year. Therefore, those who retire in 2022 will use the 2021 November rate, while those who retire in 2023 will use the November rate from 2022. The 2021 November rate was 2.72 (in the 2nd segment, which is the most impactful). The current August rate is 4.62 in the second segment which is already a 1.9% increase (likely leading to a 19% drop in lump-sums if rates were calculated today. What that August rate does not account for is that interest rates skyrocketed in the month of September, and we are anticipating another big increase.

If this trajectory continues, AT&T employees could see lump-sums drop by significantly more than 20% in 2023. The craziest part of all of this is that one day could make $200,000 difference. If an AT&T employee were to leave the company on January 1st, 2023 instead of December 31st, 2022 then they will go into retirement with a massive loss in capital. New Jersey employees who are considered “Legacy AT&T” will need to leave even sooner. Legacy AT&T employees must be off AT&T’s books in November 2022 to take advantage of the lower interest rates. You do not want to make a $200,000 mistake, so make sure you are aware of when you need to leave the company to lock in your rate.