Federal Government employees are understandably feeling a great deal of uncertainty right now. For many, this is the first time they’ve felt this level of unease about their position. While it’s easy to feel the current employment climate is unprecedented, government layoffs have happened under multiple administrations. Most notably, in the 1990s, the National Partnership for Reinventing Government eliminated over 426,000 federal positions in seven years.
Still, the level of unease amid the surge in early retirement for federal employees and government layoffs has emotions running high. While recent rulings have supported reinstating released federal workers, it’s still too soon to know where current cuts will end. At Good Life Financial Advisors of NOVA, we want our clients to know that while the uncertainty is unsettling — it doesn’t necessarily equate to an emergency. Instead, it presents an opportunity to reassess and strengthen your financial foundation.
Steps To Take To Help Weather Potential Government Layoffs or Federal Early Retirement
Remember, your most valuable asset is your ability to earn a living, backed by your skills and credentials. While the prospect of job loss is daunting, taking proactive steps now can help you navigate effectively. Some strategies to consider include:
Update Your Professional Profile
Begin by polishing your resume and enhancing your LinkedIn profile. Reconnect with former colleagues and expand your professional network. As the saying goes, “Dig your well before you’re thirsty.” Building a robust network before you need it can open doors to new opportunities and provide support during transitions
Analyze Your Budget: The ELF Approach
Understanding your personal financial landscape is paramount in any economic climate. At Good Life Financial Advisors of NOVA, we break down expenses into three categories: Essentials, Lifestyle, and Fun (ELF).
- Essentials: These are non-negotiable expenses necessary for basic living, such as housing, utilities, groceries, transportation, and healthcare.
- Lifestyle: These expenses enhance your quality of life but aren’t critical for survival. They include cable subscriptions, dining out, gym memberships, and other discretionary spending.
- Fun: These are purely leisure expenses, like entertainment, hobbies, and vacations.
By categorizing your expenses, you can identify areas to adjust, helping to maintain financial consistency during uncertain times.
Build a Liquidity Cushion
Focusing on cash flow and liquidity can help provide access to funds amid periods of reduced income. Prepare for a potential 6- to 9-month job search by enhancing your liquidity:
- Emergency Savings: Aim to have sufficient non-retirement savings to cover several months of essential expenses.
- Home Equity Line of Credit (HELOC): If you own a home, consider establishing a HELOC as a financial safety net.
- Thrift Savings Plan (TSP) Loans: While borrowing from your TSP is an option, be cautious. If you’re under 55, tapping into the TSP could result in significant tax implications if you don’t repay the loan with the scheduled repayments.
- Credit Card Management: If you have high-interest credit card debt, explore balance transfers to 0% interest cards to reduce financial strain.
Evaluate Protection Measures
Safeguarding your well-being during job transitions involves:
- Health Insurance: Understand how job changes affect your health coverage. Explore options beyond COBRA, such as marketplace insurance plans, which may offer more affordable alternatives.
- Life Insurance: Assess your life insurance needs. Compare private market policies to the Federal Employees’ Group Life Insurance (FEGLI). If you’re in reasonably good health, you may be able to get a less expensive policy on the open market rather than continuing FEGLI.
Conduct a Comprehensive Resource Inventory
Take stock of all available resources:
- Severance Packages: Understand the details of any severance offered, including benefits and duration.
- Unemployment Benefits: Research eligibility and the application process for unemployment insurance in your state.
- Retirement Accounts: Review your retirement accounts, but avoid making hasty decisions about withdrawals, especially considering potential penalties and tax implications.
Revisit Long-Term Projections
While immediate needs should take precedence, it’s also beneficial to reassess your long-term financial goals. Adjustments may be necessary, but they should be made thoughtfully, considering the current climate and your personal circumstances. This is where working with an experienced financial advisor can make all the difference. The decisions you make now — whether about retirement accounts, liquidity strategies, or investment allocations — can have lasting impacts on your financial future. A knowledgeable advisor who understands the unique complexities of federal benefits, TSP options, and pension structures can help provide clarity as you navigate.
Schedule a Consultation with Good Life Financial Advisors of NOVA
Federal employees face unique economic challenges during job transitions. Understanding TSP options, liquidity strategies, and benefit changes can be complex, and having a clear financial plan is essential.
At Good Life Financial Advisors of NOVA, we work with federal employees to assess their financial standing, explore options for maintaining cash flow, and plan for both short- and long-term needs. If you’re evaluating your next steps, a consultation can provide insights tailored to your situation.
Schedule a call with us to discuss your financial options and next steps today!
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification mark CERTIFIED FINANCIAL PLANNERTM in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.
