DavidA growing number of federal employees are being forced to make high-stakes financial decisions with little time to prepare as agencies ramp up layoffs every 90 days under ongoing government cost-cutting mandates.
The increasingly rigid schedule for conducting Reductions in Force (RIFs) is placing workers in a difficult position, especially those nearing retirement. Experts say many do not fully understand the financial implications of being laid off—or the limited options available to them.
Federal workers affected by a RIF typically face a tough choice: accept an early retirement package under the Voluntary Early Retirement Authority (VERA), or risk being laid off entirely. But retirement experts warn that the compressed timeline of the 90-day layoff cycle leaves little room for proper planning, especially for those trying to secure long-term financial stability.
“This is a real financial crisis for many federal workers,” said Michael A. Scarpati, a certified financial planner and CEO of RetireUS, a fintech company focused on retirement guidance. “People assume retirement decisions are made years in advance, but these layoffs are forcing families to figure out their financial futures in just a few weeks.”
Scarpati leads a national effort to support impacted workers through Government Transition Decision HQ, a free resource hub offering webinars, one-on-one planning sessions, and tools tailored to the federal retirement system. His team has seen a surge in inquiries since the layoff cycle accelerated earlier this year.
At the core of the issue is a lack of awareness about available options. Many federal employees, for instance, are unaware they can access their Thrift Savings Plan (TSP) early without penalty using IRS Code 72(t)—a little-known rule that allows for a series of substantially equal periodic payments before age 59½.
“Most workers don’t know this even exists,” Scarpati said. “Without this knowledge, people end up draining savings, taking on debt, or missing key benefits.”
Early access to TSP funds can be a critical lifeline, particularly for workers in their 50s who are not yet eligible for Social Security or full pension benefits. With mortgage payments, college tuition, and rising healthcare costs to consider, being pushed out of the workforce without a strategic plan can have long-term consequences.
Adding to the problem, many federal employees risk losing their FEGLI life insurance coverage if they leave government service without meeting eligibility thresholds. Others may miscalculate how much they’ll need in retirement or withdraw funds too quickly in a panic—decisions that can erode decades of financial progress.
Meanwhile, the broader economic environment is compounding anxieties. Moody’s recent downgrade of the U.S. credit outlook has raised concerns about rising borrowing costs and pressure on entitlement programs like Social Security and Medicare. Federal employees, especially those on the verge of retirement, are bracing for potential cuts or changes.
The Trump administration’s Department of Government Efficiency (DOGE) initiative has prioritized workforce reduction as part of a larger effort to streamline federal spending. While proponents say the move is necessary to rein in debt, labor unions and retirement advocates warn it’s being executed with little regard for how unprepared most workers are for an abrupt financial transition.
Retirement planning has traditionally been a long game. But for federal employees now facing 90-day decision windows, there’s growing urgency to act fast and act smart.
“Rushed decisions under pressure almost never result in the best financial outcomes,” Scarpati said. “That’s why we created a dedicated platform to help federal workers understand their rights, their benefits, and their options before it’s too late.”
Government Transition Decision HQ has already supported dozens of public servants navigating buyouts and layoffs, but the need is only growing. With the next RIF cycle expected to hit in early July, financial advisors are urging workers to take action now—whether or not they believe they’ll be directly affected.
“We’re entering a new era of federal employment,” Scarpati said. “The workers who thrive will be the ones who treat financial planning as a necessity, not a luxury.”