What AT&T Retirement Plan Problems Say About 401(k) Management

With nearly a quarter-million employees around the nation (please footnote reference), AT&T is a huge employer – and, naturally, most of those employees are enrolled in the AT&T retirement plan.  We’ve worked with quite a few such individuals, and there’s a common issue we’ve seen in nearly all of them – their AT&T retirement plan emphasizes having AT&T stock in their 401(k), which causes their financial fortunes to be tied directly to the health of the company.

While AT&T is a strong company, to be sure, it’s not invulnerable – as we’ve seen in the Coronavirus crisis. At the beginning of 2020, up to about six months ago, their stock was floating between $38-$39 per share*. However, they were hit hard in the stock market drop that accompanied the pandemic, and as of writing (September 2020), their stock is now in the $27-$30 range*. That’s a loss of a quarter of its value, due to circumstances entirely outside of the company’s control or influence.

For anyone who’s part of the standard AT&T retirement plan, this means a massive hit to their 401(k) – and it’s the same for anyone else heavily invested in AT&T.

This points to the importance of diversifying your 401(k) as much as possible.

A Diversified 401(k) Is A Safer 401(k)

To be clear: any form of investment in the stock market is something of a gamble, and there’s no such thing as a 100% guaranteed safe investment.  However, diversification makes it much more likely that a major event – like a disease outbreak – won’t have catastrophic effects on your retirement plan.

In the case of the AT&T retirement plan, it was deliberately set up so that most of the 401(k) was AT&T stock.  It is possible for employees to move the money around and diversify their portfolio, but many did not do this.

For everyone else, it’s a good idea to get certified financial planning when it comes to your 401(k).  A trained analyst can help you understand how stable your retirement situation really is, and how likely it is to be disrupted by unexpected events.  We particularly favor the “stress test,” where we simulate the effects of sudden stock drops on a 401(k) to see the end results.

Merit Financial Advisors

Merit Financial Advisors is dedicated to helping our clients plan for the future and develop robust retirement plans that should be resistant to all but the most catastrophic of events.  To help ensure your financial future, please contact us.

Opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Merit Financial Group, LLC an SEC registered investment advisor. Merit Financial Group, LLC, Merit and Merit Financial Advisors are separate entities from LPL Financial. Merit Financial Advisors, LLC, Merit, Merit Financial Advisors and LPL Financial are not affiliated with AT&T.l.

* https://www.statista.com/statistics/220683/number-of-atundt-employees-since-2007/
* https://finance.yahoo.com/quote/T/