Uncover the tax nuances of choosing between an annuity and lump sum. Make an informed retirement decision with tax efficiency in mind.
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Disclaimer: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Fees are incurred when assets are under the management of advisors affiliated with The Retirement Group. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice. Securities offered through FSC Securities Corporation, member FINRA/SIPC. Investment advisory services offered through The Retirement Group, LLC. a registered investment advisor not affiliated with FSC Securities Corporation. The Retirement Group is not affiliated with AT&T. The Retirement Group, LLC is registered to conduct advisory business in the following states: AZ, CA, CO, FL, ID, IL, IN, LA, MI, MS, MO, NE, NV, NJ, NY, NC, OK, OR, SD, TX, UT, VA, WA. Through FSC Securities Corporation, we have advisors securities licensed in the following states: AK, AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NV, NY, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, VT, WA, WI, WY.

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Q&A for AT&T Employees: Tax Impacts – Annuity vs. Lump Sum

For AT&T employees who are approaching retirement, there are important decisions to be made about how to receive their retirement savings. One key decision is whether to receive their retirement benefits as a single lump sum or as an annuity payment over time. There are tax implications for both options, and it’s important for employees to understand these impacts so they can make an informed decision.

To help clarify the tax implications of choosing between an annuity and a lump sum, we have put together a Q&A for AT&T employees.

Q: What are the tax implications of receiving a lump sum?

A: When you receive a lump sum distribution from your retirement plan, the entire amount is subject to income tax in the year it is received. This can result in a large tax bill for the year in which you retire. Additionally, if you are under the age of 59 ½, you may also be subject to a 10% early withdrawal penalty.

Q: What are the tax implications of receiving an annuity?

A: An annuity payment is typically spread out over a number of years, which can help to reduce the tax burden in any one year. The IRS allows for a portion of each annuity payment to be considered a tax-free return of your original contributions, which can further reduce the tax impact.

Q: Are there any other tax considerations to keep in mind?

A: Yes, there are a few other important tax considerations to keep in mind when making this decision. One factor to consider is the possible impact on your Social Security benefits. If you receive a large lump sum distribution, it could push you into a higher tax bracket and result in a portion of your Social Security benefits being subject to taxation. Another consideration is the potential impact on your estate and heirs. Depending on your individual circumstances, choosing an annuity could offer better estate planning benefits.

Q: How can I make an informed decision about which option is best for me?

A: Making a decision about how to receive your retirement benefits is a significant financial choice, and it’s important to weigh the tax implications as well as other factors such as your overall financial situation, health, and long-term goals. We recommend consulting with a financial advisor or tax professional who can help you understand the tax implications and other factors that may impact your decision.

Q: What resources are available to help AT&T employees make this decision?

A: AT&T offers a variety of resources to help employees navigate their retirement benefit options, including online tools, retirement planning seminars, and access to financial advisors. Additionally, employees can reach out to the AT&T benefits department for personalized guidance and information.

In conclusion, the decision of whether to receive retirement benefits as an annuity or lump sum has important tax implications that should be carefully considered. AT&T employees who are approaching retirement should take the time to understand the tax impacts of each option and consider consulting with a financial advisor or tax professional before making a decision. By doing so, employees can make an informed choice that aligns with their individual financial goals and circumstances.