Don’t Panic—Plan: A Federal Employee Guide to Surviving A Shutdown, RIF and Layoffs

Worried about a shutdown or RIF? These are practical steps for federal employees to help safeguard your finances, benefits, and your career.

What Actions to Take During Shutdown and Possible Employment Loss

This is a rough time for federal employees—especially those now classified as “non-essential” and who may not be reporting to work and facing a potential loss of employment.

Experiencing stress and strain in this situation is no surprise. If you do not feel the stress of this moment, you are a unique individual.

This article offers ideas to help reduce stress and provide better protection for you and your family in the immediate future.

Those reading this column are in different situations but have a lot in common. A federal employee who is about to retire, an employee who is in mid-career status or just starting out, or those with a large amount in the Thrift Savings Plan (TSP), applying for federal retirement now or in the immediate future, and no mortgage, will all be looking at a situation with different stress levels and different concerns.

For all federal employees, having a plan in place (and writing it down) will reduce your stress, and may prevent you from making a snap decision based on short-term fear that may negatively impact your future financial status.

Here is one fact to keep in mind for all current federal employees: Shutdowns do not last a long time. Even if it lasts 4-6 weeks, which is longer than most shutdowns last, that is a short time. Do not make any sudden financial moves that may make you feel better right away but may damage your financial future.

Also, do not make decisions based on your political philosophy. During times of unpredictable circumstances and change, some federal employees or retirees may rely on their political beliefs. Whether you support or dislike an administration or a political party, looking at the current situation through a political lens will not serve your long-term career or financial interests.

This author has been through a number of federal government shutdowns as a federal human resources specialist and author on HR topics spanning several decades. I experienced shutdowns as a government employee, a federal contractor, and as the spouse of a federal employee who was sent home without pay during the shutdown (and still wasn’t paid for a few weeks after it ended).

This column is based on a career in the federal government environment, and I have lived through stressful times similar to what is now occurring. I have made short-term decisions that were ill-advised, and I also made decisions during a shutdown environment that served my family well in the long term. Do not panic; instead, think before you act and remain calm when faced with political actions and decisions that will be made, as well as shocking statements that make headlines.

Immediate Steps for Any Employee Facing a Potential Layoff

The term used to describe a loss of income is not relevant. Telling your spouse that you will not have a paycheck coming in for the immediate future is going to be unpleasant. Whether you call it a layoff, a reduction-in-force, a government shutdown, or government restructuring, it does little to mitigate the inevitable emotional reaction for most people.

Here are the steps to take during this event.

Build or protect cash reserves

• Goal: Have 3–6 months of essential expenses in a liquid savings account.
• If a shutdown is imminent, pause discretionary spending (vacations, big purchases, extra loan payments) to build liquidity quickly.
• Move any recent windfalls (bonuses, tax refunds, TSP loans, etc.) into a high-yield savings account.

Prioritize essential bills

• List essentials: housing, food, insurance, utilities, transportation, and healthcare.
• Contact mortgage, credit card, or utility companies early—many have hardship or forbearance programs for furloughed federal employees.

Avoid taking on new debt if possible

Taking out a second mortgage or home equity loan can backfire. Keep in mind that any government shutdown will last a short time—even if it does not seem like a short time— in the scheme of your overall career.

Here are the problems with taking on debt:

• These types of debt obligations add fixed payments and put your home at risk if income disruption is prolonged.
• Consider a home equity line of credit (HELOC) only as an emergency liquidity backup, not as an immediate draw.
• If it is not too late, secure the line while you still have a full income—banks may not approve new credit once a shutdown begins.
• Use it only if it is absolutely necessary to protect your credit rating, keep your family in your home, or address other serious problems.

Maintain healthcare and insurance

• FEHB premiums generally continue during furloughs, but check whether temporary non-pay status could interrupt automatic payments.
• Do not drop life insurance or long-term care coverage unless absolutely unavoidable; reinstatement later can be costly or medically restrictive.

TSP (Thrift Savings Plan) and Retirement Accounts

• Avoid withdrawing from your TSP unless you are financially desperate. Remember that withdrawals or loans interrupt long-term compounding.
• If you’re mid-career, consider temporarily stopping contributions to preserve cash, then restart when the temporary disruptions appear to be resolved and your career is back on track.
• If you are close to retirement, maintain your TSP balance and avoid emotionally driven shifts to cash or the G Fund unless your situation or risk tolerance truly has changed. Do not make a quick decision to reduce risk, and a possible loss of future financial gains, without thinking through your situation and discussing your financial plan with your financial advisor. If you do not have a financial advisor, now may be a good time to use this type of service.
• Note: You cannot contribute during a furlough since there’s no paycheck, but employer match resumes automatically afterward.

Considerations Based On The Stage of Your Federal Career

Mid-Career (10–25 years of service)

• Focus on stability and flexibility.
• Build emergency savings equal to at least 6 months of core expenses.
• If you have kids or mortgage obligations, build contingency plans—could you pause tuition payments, refinance to lower monthly costs, or pick up side consulting/freelance work temporarily?
• Maintain professional credentials; in a layoff scenario, it’s easier to pivot with updated skills.

If You Are Near Retirement (Within 5 years)

• Evaluate your retirement eligibility and timing:
  • If eligible for voluntary or early retirement, determine whether a furlough or RIF (Reduction in Force) could accelerate your plans.
  • Check your FERS annuity calculation and FEHB carryover eligibility (you need to have FEHB for 5 years before retirement to keep it).
• Review asset allocation in TSP—make sure it aligns with near-term income needs (i.e., reduce excessive risk exposure).
• Avoid borrowing against home equity or retirement funds at this stage unless absolutely necessary; this step will reduce your financial flexibility and post-retirement income.

Other Protective Actions

• Direct deposit your paycheck into a personal account, not a credit union tied to government operations—some smaller institutions—that could delay processing during shutdowns.
• Review your state unemployment rules—most furloughed federal employees cannot claim unemployment if they expect back pay, but policies can vary by state and shutdown duration.
• Stay informed about emergency relief measures—Congress often authorizes back pay or temporary relief programs.

Summary: Is a Second Mortgage Advisable?

Best Overall Strategy

• Preserve financial liquidity, protect long-term assets, and avoid locking in new fixed obligations.
• If you are near retirement, focus on preserving capital and maintaining benefit eligibility.
• If you are mid-career, consider building flexibility by having extra savings, take advantage of your side income potential, and minimize your monthly financial obligations.