When news about possible agency defunding starts making the rounds, it’s natural to have questions about your job and your plans for the future. We talk with Feds every day who are trying to figure out what a situation like this could mean for their career and finances.
The truth is, there’s a lot you can’t control. But there are still some practical steps you can take to protect yourself. Taking an active approach to federal employee career transition planning can help you feel more confident about your next move. Let’s take a closer look at your options.
Understanding the Risks of Agency Defunding
In the context of the government, “defunding” means a reduction or elimination of an agency’s budget by Congress or the administration. This can result in job losses, program shutdowns, or the complete closure of an agency.
Some administrations implement cuts immediately, leading to rapid layoffs or closures. Others may phase in changes over several months, offering reassignment, early retirement, or buyout incentives.
Key warning signs include repeated budget cut proposals, shifts in political priorities, hiring freezes, delayed projects, or an uptick in early retirement or buyout offers. Lack of clear communication from agency leadership can also signal potential uncertainty.
Career Contingency Planning: Exploring Your Options
When facing defunding, many Feds have options that can soften the impact of sudden changes. Some employees may qualify for early retirement under federal rules, especially if major workforce reductions are planned.
Agencies may also offer Voluntary Separation Incentive Payments (VSIP), which are lump-sum payments for those willing to leave voluntarily. However, before making this decision, it’s important to weigh the immediate financial benefit against the long-term impact on your retirement income and benefits. A CERTIFIED FINANCIAL PLANNER™ professional can help you make an informed decision. For certain Feds, seeking another position within the federal government may be a better move than retiring early.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
Federal and Union Protections
Federal employment laws require agencies to give advance written notice of layoffs or major changes. You may also have access to career transition programs, severance pay, and the right to appeal employment decisions.
If you’re part of a union or professional association, reach out early for guidance. Your representative can help you understand your rights, attend critical meetings with you, and support you if you need to file a grievance or dispute a benefit decision. In addition, if you believe you’ve been wrongfully terminated or denied benefits, you may consider consulting with a legal expert who is well-versed in federal employment law.
Financial Strategies to Stay Secure
If your agency faces defunding, it’s important to understand how the changes may affect your pension, Thrift Savings Plan (TSP), and federal health benefits. Leaving federal service before retirement age may reduce your pension and impact TSP contributions. You’ll also need to review your options for health insurance, such as Temporary Continuation of Coverage (TCC) or enrolling in a spouse’s plan.
As soon as possible, start working on building your financial safety net. Many experts recommend keeping at least three to six months of expenses in emergency savings. Reducing debt and cutting nonessential spending can also help you stay on track if your income changes. Financial planning for federal workers is especially significant during times of uncertainty, as it helps you make informed decisions about benefits, savings, and potential career moves.
For those exploring a career shift, federal skills can open doors in the private sector or in consulting roles. These opportunities often offer flexibility and pay well, but you may find that health insurance is more expensive (or not provided at all), and retirement plans may not match your previous federal pension or TSP. As you weigh your options, consider whether you prefer stable benefits and steady income or the independence and earning potential of self-employment.
Taking Control of Your Future
Planning ahead can make all the difference when facing job uncertainty. If you haven’t started, now is the time to review your options and talk with trusted experts, such as a financial advisor, a career coach, or your agency’s HR team.
While the situation may feel overwhelming, proactive planning gives you more choices if changes come your way. For personal guidance, reach out to the team at Serving Those Who Serve at [email protected].
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. **
