There’s no denying that federal job security isn’t what it used to be. Budget cuts, agency restructuring, and shifting political priorities have placed many roles at increased risk. With a recent proposal calling for the elimination of over 100,000 positions by 2026, even long-tenured Feds are now starting to pay attention.
Many of our clients are taking a fresh look at their financial plans through the lens of federal employee job loss preparation. Taking a few simple steps now can give you a stronger sense of control if reductions reach your agency.
Assess Your Financial Foundation
The first step is to understand exactly where you stand financially. Begin by reviewing your monthly cash flow (money coming in vs. money going out) and categorize all expenses as either necessary or discretionary. This can help identify where to make cuts if the need arises.
If able, make sure you have an emergency fund to cover a potential loss of income. Experts generally recommend having three to six months of living expenses on hand. However, a larger cushion can give you more stability if you’re impacted by job cuts. Considering the current environment, you may want to target nine months to a year's worth of expenses, especially if you and your partner are both Feds.
Maximize Benefits While You Can
Assessing your current benefits and using them strategically is a key part of financial planning for RIFs (reductions in force). Making the right moves now could help you save more, reduce costs, and strengthen your overall financial position. Here are a few things to consider:
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- Thrift Savings Plan (TSP): While you’re still working, if you are able, contribute at least 5% each pay period to get the full agency match. Also, consider whether you might benefit from adjusting your portfolio to a more conservative allocation.
- Health benefits: If you expect to lose or change coverage after separation, schedule any medical appointments, screenings, or procedures you’ve been putting off while your current coverage is still in place.
- Annual leave: Track your accrued leave and plan for how you’ll use the lump-sum payout, as this can help provide a financial cushion during your transition.
- Sick leave: Remember that unused sick leave has no cash value if you separate before retirement. If you retire or accept early retirement as part of an RIF, it is credited toward service time and can increase your pension.
The more clarity you have regarding your benefits, the easier it will be to make informed decisions if you find yourself facing cuts.
Explore Safety Nets and Alternative Income Sources
Federal employees are generally eligible for unemployment if separated through a RIF, although the rules vary by state. To avoid a delay in benefits, file as soon as possible after your separation. Many Feds in transition take on part-time work, consulting, or freelance opportunities to supplement their income.
You may also have the option to transfer to another federal agency or position, especially if you qualify for the Reemployment Priority List or have in-demand skills.
Work With a Trusted Advisor
A CERTIFIED FINANCIAL PLANNER™ who understands federal benefits can test your plan against different scenarios, ranging from short-term job loss to early retirement. Revisiting your plan may help you find gaps to address and give you a clearer path forward. For personalized support, reach out to the team at Serving Those Who Serve at [email protected].
The Thrift Savings Plan (TSP) is a retirement savings and investment plan for Federal employees and members of the uniformed services, including the Ready Reserve. The TSP is a defined contribution plan, meaning that the retirement income you receive from your TSP account will depend on how much you (and your agency or service, if you're eligible to receive agency or service contributions) put into your account during your working years and the earnings accumulated over that time. The Federal Retirement Thrift Investment Board (FRTIB) administers the TSP.
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
