Why Do Companies Make Early Retirement Offers?

Early retirement offers tend to appear when a company wants fewer employees and would rather people leave voluntarily than be laid off. An offer can look generous at first glance. Whether it works for you depends less on the headline number than on your savings, your health coverage, your pension and how many years you were planning to keep working. The questions below are the ones to answer before you sign anything from AT&T.

How Is the Severance Part Usually Calculated?

Many packages pay a set number of weeks of salary for each year of service, sometimes with a minimum and a cap. Find out if the money comes as one lump sum or as salary continuation over several months, and whether it counts toward a bonus, the 401(k) match or the pay used in a pension formula. Severance is wages for tax purposes, subject to Social Security and Medicare tax, and an employer using the flat supplemental rate withholds 22% federal income tax for 2026 (37% on amounts above $1 million). If your tax bracket is higher than 22%, that withholding may fall short of the tax you end up owing.

How Will Accepting the Offer Affect Your Pension?

Traditional pension formulas generally use your pay, your years of service and your age when payments begin. Leaving early stops service from building and may bring an early-retirement reduction, and the final years of a career often add the most value because pay tends to be highest then. Packages sometimes offset this by crediting extra years of age or service, or by paying a temporary supplement until Social Security, which can begin as early as 62 at a permanently reduced amount, about 30% less for someone whose full retirement age is 67. Ask AT&T for written pension estimates with and without the offer, and for the lump-sum figure if the plan offers one.

What Happens to Your 401(k)?

If you leave AT&T in or after the year you turn 55, withdrawals from AT&T's 401(k) are not subject to the IRS's 10% early-withdrawal tax, though income tax still applies. Rolling the account to an IRA ends that exception for the money you roll. A distribution paid to you, instead of rolled directly to an IRA or another plan, has 20% federal income tax withheld. If you are younger than 55 in the year you leave, the 10% tax generally applies to withdrawals before 59 1/2 unless another exception fits.

How Will You Cover Health Care Before Medicare?

Medicare generally starts at 65, with a 7-month sign-up window around the month you turn 65. Until then, the usual options are coverage paid for in the package, COBRA for up to 18 months at up to 102% of the premium, a spouse's plan, or a Marketplace plan. For 2026, Marketplace premium tax credits stop at 400% of the federal poverty level, which is $62,600 for a single person in the continental U.S.

How Much Time Do You Have to Decide?

If you are 40 or older and the offer asks you to waive age-discrimination claims, you generally get at least 45 days to review a group offer, or 21 days for an individual one, and 7 days to revoke after you sign. For a group program, the company must also tell you in writing who was eligible and the ages and job titles of those who were and were not offered the package. Use that time to have an employment attorney read the release.

Should You Accept?

Accepting may make sense if your savings, pension and health coverage can carry you to Social Security and Medicare, or if you were planning to leave within a year or two anyway. Declining may make more sense if you need the paycheck, your pension still has valuable years ahead, or the health benefit in the package ends quickly. AT&T is not obligated to repeat the offer, and a later round of cuts could be less generous. A side-by-side projection of both choices, with taxes and health costs included, can show which one holds up for you. The AT&T plan details below are the starting inputs for that projection.

What Happens to an AT&T Pension or 401(k) If You Accept Early Retirement?

AT&T's own plan rules spell out exactly what changes if you take this kind of offer. AT&T's noncontributory pension for most nonmanagement Communications employees pays either a flat dollar amount by job classification or a cash balance formula with pension band and interest credits, and most of these employees can choose a lump sum or an annuity. Pension programs for management employees are closed to new entrants, covering those generally hired before January 1, 2015, under a cash balance formula or an older formula based on adjusted career income, and AT&T's Management Cash Balance Program has let any terminating participant take a single lump sum since October 1, 2016. For the 401(k), the plan's 2018 summary describes a vested account over $1,000 staying invested until you pick a full lump sum, a partial or installment payout, a deferred distribution, or a rollover.

What About Severance and Health Coverage Until Medicare?

Severance and retiree health fill in the rest of the picture before you decide. AT&T's Severance Pay Plan reported 57,015 total participants for the 2025 plan year, including 53,708 active employees and 3,307 who had separated with a benefit due. AT&T's Health Reimbursement Account for Medicare-eligible retirees stopped getting new company contributions after December 31, 2023, though a retiree with an existing balance can still file claims for eligible costs, including Medicare Part B premiums. Compare what a package would actually fund against COBRA or marketplace coverage for the months before you reach 65.