Whether you currently work for the federal government or you are a retired fed, a lot of you have emailed Federal News Radio with your questions about what will happen to you in the event of a government shutdown.
Arthur Stein, a certified financial planner with SPC Financial in Rockville, Maryland, told Federal News Radio, his advice for active and retired feds is to have an emergency fund of three to six months set aside.
“Now federal employees and retirees who consider themselves very safe, and in most respects they are, are all of a sudden seeing why they might need an emergency fund,” Stein said. “Of course, most of us have heard that advice before, but somehow we never seem to be able to pull it all together.”
If people don’t have an emergency fund, one way to quickly build it up is to reduce your contributions to the TSP until you get the emergency fund that you need. Of course FERS employees never want to go below a five percent contribution because they want to get the full match, but if you need to reduce your contributions to the TSP, you can do it online, you can do it over the phone, it’ll take place pretty quickly and you all of a sudden will be getting more money and then you just have to have the discipline that you need to put that into a special savings account or money market fund and only leave it there for emergencies.
Looking back on the shutdown of ’95 for what to expect this time isn’t worth the trouble, Stein said.
“I think historically, for these types of events, is not all that telling because these things are so unusual, so political that who knows how it would play out, how it would happen,” he said.
Stein suggest two other things you can do now to prepare, just in case of a shutdown”
Arrange for a home equity line of credit, said Stein. “A home equity line of credit is a better way to go than using credit card debt or even a loan from the TSP to pay your expenses if there is a prolonged furlough and a prolonged period of non-payment.”
Contact your mortgage lender. “It’s hard to say what any of the banks or loan companies are going to do,” said Stein, but it’s worth trying so that being late on a payment won’t hurt your credit score.
If there are no furloughs, no shutdown, no delay in annuity payments, there’s no harm in being ready anyway, said Stein.
“It’s very hard to figure out what could happen and I certainly have no idea what would happen, but I do know that people should be prepared for financial emergencies, whether it’s a furlough from their federal job or an interruption in the payment of their retirement benefits, a family emergency, or maybe a good thing like your daughter is getting married and all of a sudden you need a lot of cash to pay for that.”