Why federal workers are facing a financial wake-up call

Photo credit: Towfiqu Barbhuiya

Picture this. You turn on the news and hear recent changes in the workforce industry. Thousands of layoffs have surged the nation, and suddenly, workers are in desperate search for new jobs with reasonable salaries and good benefits. Unfortunately, that’s the surreal reality some individuals are now facing under a new mandate from the Trump administration.

While for decades, federal employment came with a comfortable promise of job security, the current workforce is not what it used to be. The truth is, many government workers are being forced into retirement, but only to realize they’ve been pushed out before they are financially ready to make the shift.

“Federal employees have long relied on pensions and job security, but that safety net is disappearing overnight,” says Michael A. Scarpati, CEO of RetireUS, a fintech company offering individuals financial security. “Thousands are being forced into early retirement before they’re financially prepared, creating an income gap they never anticipated. Many assumed their pensions would be enough, but now they face additional years of retirement expenses and unexpected reductions in their benefits. If federal employees don’t calculate these shortfalls now, they could be facing serious, long-term financial consequences in retirement.”

Recent changes in the political system have undoubtedly made federal jobs less reliable and predictable over the years. In today’s current landscape, a recent survey revealed 31% of people reported being forced into retirement due to organizational restructuring or company layoffs. Only a third of early retirees are choosing to leave themselves, proving much of retirement is out of peoples’ control.

Yet, while retiring early sounds like everyone’s distant dream, there are some serious consequences if you don’t take action early enough. Without strategizing, retirees might find themselves in emotional burden, because everyday tasks like paying utility bills and covering medical expenses soon become sources of stress.

The repercussions at stake, what is the solution if you’re hitting retirement or suddenly forced into it?

“Federal employees should start by calculating their true retirement needs and comparing them to their expected income, factoring in potential pension reductions and tax liabilities,” Scarpati added. “Next, they need a supplemental income strategy, whether that’s part-time employment or leveraging the Thrift Savings Plan to bridge their income gap. Small tweaks can stretch savings significantly when you know your income needs. The key is to take control now, because in today’s climate, waiting too long to plan could be the most expensive mistake of all.”

The good news is you are not alone as far as retirement preparation, in fact, you’re likely the majority of the population. In a SoFi survey about retirement readiness, 75% of adults claim they do not know how much money they will need to retire. Most retirees only have a surface level plan in place, but it is nowhere near ready to start retirement.

Taking control of your financial stability in order to prepare for retirement does not mean figuring it all out overnight. Rather, you can start small and even seek support from a financial advisor to make ends meet. Maybe, it is even a matter of understanding what you do know, such as your streams of income and expenses you owe. Knowing that level of detail is your first step to becoming financially ready to leave the workplace.

What is happening to federal workers today is a wake-up call for anyone nearing the retirement age. Because let’s face it, even with an accomplished decades-long career, the current labor system shows us that it is ever-changing. 

Thinking about retiring or suspect a nudge might be coming? It’s never too early to begin your financial strategy. If there’s one thing we do know, it’s that your steady life is worth fighting for.