Planning to Retire from AT&T? The New Tax Bill Changes Everything

The newly signed One Big Beautiful Bill Act (OBBBA) introduces significant changes to the tax code, many of which make permanent or expand provisions from the 2017 Tax Cuts and Jobs Act (TCJA). While much attention is given to tax brackets and deductions, the impacts on AT&T employees—both in management and union positions—are extensive, particularly regarding pension decisions, 401(k) strategies, and retiree medical planning.

 Whether you are just starting your career at AT&T or are in the final five years before retirement, this new legislation will affect you.

Why It Matters

With more than 200,000 active AT&T employees and thousands retiring each year, the new tax law significantly changes how your income, pension, and retirement savings will be taxed. Failing to take action or making mistakes could cost you thousands in the long run.

If you are within five years of retirement, you may be particularly vulnerable to these changes. Younger employees should take proactive steps now to develop a long-term strategy that maximizes the benefits of new deductions and helps avoid unexpected tax issues in the future.

1. Your AT&T Pension: The Rules Just Changed

For Management and Union Employees Alike

• AT&T provides different pension formulas depending on your role—whether you are in a union or management—as well as your participation in the Legacy or Bargained plans.

• Managers typically have a cash balance pension, which accumulates over time based on their compensation and interest credits. 
• Union employees usually participate in traditionally defined benefit plans, where the pension is calculated based on the number of service years and a multiplier.

What the Tax Law Means for You

The OBBBA (H.R.1) does not directly alter the way AT&T calculates your pension, but it does affect how that pension is taxed and whether you should consider opting for a lump sum or a monthly payout.

• The standard deduction has been permanently increased, which reduces taxable income for many individuals.
• Additionally, there is a new $6,000 senior deduction, which will phase out after 2028, that could help offset taxes on pension income for those over the age of 65.

Tip: If you're union and eligible for retiree medical based on age and service, coordinating the timing of your pension and Medicare becomes even more important under the new law.

Before taking a lump sum or monthly payout, consult a financial advisor who understands the tax implications under the new law and is familiar with AT&T’s pension structure.

2. Roth Conversions: A Smart Move While Tax Rates Stay Low

The OBBBA makes many of the 2017 Tax Cuts and Jobs Act provisions permanent, creating a rare opportunity for Roth conversions at lower tax rates.

Key Benefits Now Locked In:

• Lower tax brackets (top rate stays at 37%)
  
  
• Standard deduction nearly doubled: $15,000 (individual) / $30,000 (joint)
  
  
• Elimination of personal exemptions and miscellaneous deductions
  
  

Why It Matters
If you find yourself between jobs, receiving severance, or retiring early, you may temporarily fall into a lower tax bracket. This can be an ideal time to convert pre-tax assets, such as a lump sum from an AT&T pension or a traditional IRA, into a Roth IRA. By doing this, you can pay taxes now at a lower rate and benefit from tax-free growth in the future.

The Risk of Waiting
Delaying Roth conversions could lead to higher taxes in retirement when your income rises from pension, Social Security, or required minimum distributions (RMDs).

Tip: Use these low-tax years strategically, but always consult with a financial or tax professional familiar with AT&T benefits before making any changes.

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3. Union Employees: Overtime and Income Planning Under OBBBA

AT&T union employees, particularly those in hourly positions such as technicians, call center representatives, and field service roles, may benefit from a new temporary deduction included in the OBBBA.

Key Provision: Overtime Pay Deduction 

• From 2025 to 2028, workers receiving overtime can deduct up to $12,500 in qualified overtime pay from their taxable income ($25,000 for those filing jointly as married couples). 
• This deduction applies to individuals who do not itemize their deductions, making it accessible to many middle-income earners. However, the deduction phases out for individuals earning over $150,000 (or $300,000 for joint filers).

Why It Matters

If you frequently earn overtime, this deduction could lower your tax bill in the future. However, be aware that receiving a substantial amount of overtime may increase your income to a level near the phase-out limits, which could reduce or eliminate your eligibility for this benefit.

Tip: A qualified tax professional or financial advisor can help you track your income and assess how to take full advantage of this deduction while staying below income thresholds.

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4. Social Security: What's Taxed, What's Not, and What Just Changed

There was discussion about making Social Security income tax-free, but the final version of the OBBBA did not include this change. Here’s what you need to know:

• Most retirees will not pay federal taxes on their Social Security benefits unless they have a significant income from other sources. 
• If you do have additional income—such as from a pension, employment, or withdrawals from retirement accounts—then up to 85% of your Social Security benefits may be subject to taxation. This depends on your total income and your filing status.

A New Temporary Deduction

Under the OBBBA, a new deduction of $4,000 will be available from 2025 through 2028 for individuals collecting Social Security. However, it's important to pay attention to the details:

• The deduction phases out for married couples with an income of $150,000 and single filers with an income of $75,000. It completely disappears at income levels of $350,000 for married couples and $175,000 for single filers.
• This deduction is not refundable, which means it only reduces taxable income if you already owe taxes. Consequently, it does not benefit low-income seniors who rely solely on Social Security.
• Both you and your spouse (if married) must have valid Social Security numbers to qualify.

Why It Matters for AT&T Retirees

If you intend to draw a pension or take distributions from a 401(k) while also receiving Social Security benefits, be aware that a new deduction could help lower your tax bill. However, this is only effective if you manage your income correctly. Without proper coordination, you might unintentionally trigger taxes on your Social Security income.

Tip: It may be beneficial to work with a tax advisor to structure your retirement income in a way that minimizes the taxation of your Social Security benefits.

5. Retiree Medical and Healthcare Costs: Watch for Deduction Shifts

AT&T retirees often depend on a combination of Medicare and AT&T-sponsored healthcare coverage. Under the new law:

• Medical expense deductions and the Pease limitations have been permanently eliminated, which alters how medical costs can reduce your taxable income.
• Although healthcare expenses remain high during retirement, itemizing deductions has become more challenging for many families. This makes the strategic use of Health Savings Accounts (HSAs) increasingly valuable.

Tip: If you’re still working and eligible for an HSA, max it out while you can. The OBBBA did not remove HSA benefits, and it remains a top tax-advantaged tool for healthcare savings.

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6. If You Do Nothing, Here’s What It Could Cost You

Choosing not to plan under the new tax law may seem easier, but it can be costly:

• Higher pension income in retirement could push you into a higher tax bracket.
• Delaying Roth conversions may cause you to miss the opportunity to lock in today’s lower tax rates.
• Overlooking deductions—such as those available for seniors, overtime, or Social Security—could result in lost savings.
• Poor timing on lump sums or Required Minimum Distributions (RMDs) may lead to unnecessary taxes or Medicare surcharges.

The tax code is now more favorable—but only if you use it intentionally.

Final Thoughts

The One Big Beautiful Bill Act has created new opportunities and risks for AT&T employees, whether you are a recent hire or just a few years away from retirement. This is important for both union members and management alike, as the relationship between your pension, 401(k), healthcare, Social Security, and tax plan has become more critical than ever.

To effectively navigate this law, it is essential to work with someone who understands the AT&T benefits system—ranging from net credited service to retiree medical eligibility—and who can align your plan with the most up-to-date tax strategies.

Need Help Understanding What This Means for You?

Understanding the new tax law's impact on your AT&T pension, 401(k), retiree medical benefits, and Social Security eligibility can be complicated. The Farther Focus Team is here to help. We assist AT&T employees—management and union—navigate their benefits and retirement options. Whether you're early in your career or nearing retirement, we can help you assess how the One Big Beautiful Bill Act may affect your finances. We'll guide you in asking the right questions and connecting with tax professionals to make informed decisions.

Schedule a complimentary retirement planning session today to see how the new tax law could affect your future—and what you can do to stay ahead.

Disclaimer: Farther and the Farther Focus Team are not affiliated with AT&T. The information provided is for educational purposes only and should not be construed as financial, legal, or tax advice. Before making any changes to your AT&T benefits or retirement plan, consult with a qualified financial or tax professional to evaluate your specific situation.

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