At Techstaffer many of our AT&T clients have said they plan to leave the company in 2021. The reasons for this include a reduction in health benefits, rising interest rates, and the appreciation of the housing market. It is not at all hyperbolic to say that staying with AT&T past 2021 could cost you hundreds of thousands of dollars. You would essentially be working for free for the next several years. Let’s take a look at numbers to see just much money you stand to lose just by staying with AT&T.
First and foremost the loss of the retiree healthcare subsidy alone could cost AT&T employees who retire after 2021 more than $80,000 over the course of their lifetime. AT&T will no longer supplement monthly premiums for medical or dental. This may not affect all employees. You should call the benefit office to inquire about your particular situation. This announcement comes on the heels of AT&T alerting employees that they will no longer offer a Healthcare reimbursement account for those who retired after January 1st 2021. Things like out of pocket costs, supplemental coverage, and incremental coverage are no longer covered by a healthcare reimbursement account from AT&T. According to AT&T’s Summary Plan description the HRA credit is worth $2,700 for an employee and $1,500 for an eligible dependent. If an employee takes full advantage of this benefit this would be worth $4,200 per year. Over a 20 year period this could save an employee and their family about $84,000.
In addition to losing healthcare benefits, AT&T employees who retire in 2022 or later could also see their lump sum drop in value. A rise of just 1% in the second segment of interest rates could cause a 8 - 12% decrease to your lump sum amount. If interest rates do rise by as much as 1% someone with a $1,000,000 pension could lose as much $120,000 simply because they retired on the wrong date. Interest rates are currently locked in at record lows for employees retiring in 2021. However interest rates have risen significantly since November of 2020 (AT&T uses November interest rates to determine lump-sum values). AT&T looks at the corporate bond segment rates to determine the lump-sum value for its employees. This is generally correlated with the 10 year treasury rate, which has nearly doubled since November 2020. While this does not mean the corporate bond rates will double as well, it is a leading indicator that rates will be substantially higher then they were last year.
The housing market has been on fire recently giving many AT&T employees the option to downsize home or move to a rental unit and use their increased equity for retirement. Many AT&T employees are becoming concerned we may be in the midst of another housing bubble. Oftentimes employees nearing retirement age are especially anxious about the housing market as much of their net worth is tied to the value of their home. By leaving AT&T in 2021 and selling your house while the market is hot, you are able to maximize the equity you receive and avoid any potential ramifications of a future housing crash.
The other factor which we’ve heard from many of our AT&T clients is they simply do not want to take on the stress of going back to the office. Since the pandemic, the majority of AT&T employees have been working from home. Now that the vaccine is widely available, many employees are being asked to once again start commuting daily to the office. While this may seem like a smaller concern, when you pair it with the fact that after 2021 you will lose your healthcare subsidy, have your lump-sum reduced and possibly see a reduction in the value of your home, it just seems crazy to stay with AT&T past 2021.