Actions To Consider During A Government Shutdown

Congress has been unable to pass legislation to fund the government, resulting in a government shutdown. What does a shutdown mean for you? If your employment or benefits are tied to the federal government, you should prepare for potential interruptions until Congress is able to pass longer-term funding.

Oftentimes, shutdowns aren't immediately resolved with longer-term funding, but instead stopgap measures. If a stopgap is passed, this could provide a helpful window to further prepare should another shutdown occur.

Please note that this list doesn’t capture every impact of a shutdown. Additionally, all shutdowns are different, and the administration has wide latitude in terms of government operations and services. But the following represents what we anticipate will be the more direct financial implications for individuals and families based on previous shutdowns.

Minimal impact: Social Security, Medicare and student loans

Social Security benefits will continue to be paid
Reduced staffing at the Social Security Administration could result in delays for benefit verifications, Medicare card replacement, and disability claims processing. But Social Security benefits will still be paid, which is a positive for individuals relying on Social Security for income. 

People relying on Medicare, Medicaid, CHIP and the VA should be able to continue receiving care 
Those who rely on Medicare, Medicaid and the Children’s Health Insurance Program (CHIP) for insurance should still be able to seek medical care and have their claims processed and paid. VA health care services are also expected to continue to operate as normal.

Student loan payments will continue to be owed 
Student loan payments will continue to be owed during a government shutdown. A prolonged government shutdown could impact the Education Department’s ability to process things like income-driven repayment and forbearance requests.

Major impact: Federal employees and contractors

If you rely on the federal government for your employment, you’ll experience the most direct and substantial impact:

• Most federal employees aren’t paid during a shutdown, even if they’re required to work. But they are entitled to back pay once it ends.
• Federal contractors impacted by a shutdown are not guaranteed back pay. 

Additionally, unlike in prior shutdowns, the current administration has threatened to further reduce the federal workforce (through layoffs). 

Actions to consider if you're furloughed (or not receiving paychecks) 

1. File unemployment benefits if you don't receive back pay
   Furloughed workers can generally file for unemployment benefits with their state, although this may make more sense for those who won’t receive back pay. In most states, if you receive back pay, you’ll be required to repay any unemployment benefits you received. 
    
2. Check in on your emergency fund. 
   The good news is that while we recommend keeping three to six months’ worth of total expenses in an emergency fund, it’s unlikely a government shutdown would last that long. The longest in history was 35 days in 2018–19. 
   
   If you have a fully funded emergency fund, it should provide reassurance that you can likely make it through this shutdown. If you don’t and a stopgap measure is passed, take that time to do what you can to build one. Every dollar helps.
    

3. Review your budget.
   If you aren’t guaranteed back pay or don’t have an adequate emergency fund, you can review your budget to reduce expenses and save that money to cover a potential income shortfall. Start by identifying which of your expenses are more flexible or not essential, to see where you can make changes first.

   • Look for substitutions — consider less expensive restaurants or buying generic rather than brand-name items.
   • Postpone larger discretionary expenses, such as a furniture upgrade, and look for smaller recurring expenses you can cut, such as subscriptions you no longer need.
   • If you’re making extra payments toward debt, consider making just the minimum payment for the next month or two.

   
   If you find you need more income, your financial advisor can help you consider the relative benefits and trade-offs of other sources of funds, such as

   • Exploring loans (see below about potential interest-free loans that may be available to furloughed workers);
   • Tapping into taxable investments, retirement accounts, or the cash value of life insurance policies; and
   • Relying on support from loved ones.

   
   It's worth noting that during a shutdown furlough, you might remain eligible to take a loan from your Thrift Savings Plan (TSP) account. Just be sure to verify your eligibility at https://www.tsp.gov/tsp-loans/.
    

4. Explore financial-assistance options
   Keep in mind that historically, many organizations have offered to help federal workers during a shutdown. This has included local kitchens providing free meals (for D.C.-area workers) and financial institutions offering interest-free loans. If the government shuts down, look up what financial-assistance programs may be available to help you. You can search for interest-free loans for federal workers to find credit unions or banks that offer them. 
   
   And for a longer shutdown, you may want to call any company to which you make regular payments (e.g., mortgage, utilities, credit cards, car loans, student loans) to find out what options are available to you. Before agreeing to anything, ask about the terms and conditions. Some of these options may result in additional costs in the future or be reported to credit bureaus. But those trade-offs may be worth avoiding late fees or penalties and defaulting on your payments.

    

Actions to consider if you're laid off 

Should the administration follow through on workforce reductions, there could be layoffs. And job loss is significantly more impactful than temporarily not receiving a paycheck. Those facing a layoff have more steps to consider, including (among others)

• Downloading your Electronic Official Personnel Folder (eOPF);
• Exploring Temporary Continuation of Coverage (TCC) for health insurance; and
• Determining what (if anything) to do with your pension plan and Thrift Savings Plan (TSP) account.

For a more complete list of steps, ask your financial advisor about our checklist for federal employees experiencing a layoff. 

Seek help from a financial advisor at any time

And, of course, reach out to your financial advisor for assistance generally. They can help create and review a budget, identify potential areas to reduce spending, and assess your emergency fund.

Other potential impacts
 

Some social services could be affected
A shutdown could impact other benefits and services, such as

• The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) – this program appears to be at risk of quickly running out of funding given the timing of this shutdown;
• The Supplemental Nutrition Assistance Program (SNAP);
• Head Start; and
• Meals on Wheels.

The timing and extent of impact could vary by location, so continue to seek benefits if you believe you qualify for them. That said, you may want to start looking into local resources, such as food banks or local senior services, which may be able to help if you lose access to these programs. 

If you rely on Head Start for child care, you may want to ask trusted friends or family members if they could provide temporary child care. You also could ask your employer about flexible work arrangements should the program temporarily close.
 

The IRS could have limited services
During a prolonged shutdown, the IRS could limit services available to taxpayers. This could mean longer wait times to get answers to your questions, as well as delayed tax refunds.
 

Business owners may have difficulty getting SBA loans
The U.S. Small Business Administration (SBA) likely won’t process applications for new business loans.
 

Travel could be impacted
Air traffic controllers and Transportation Security Administration (TSA) staff are generally considered essential workers, so they are expected to continue working without pay. That said, during the last extended shutdown this eventually resulted in more airport workers calling in sick, which can mean longer security lines and delayed flights. Additionally, national parks could close. If they remain open, services could be limited and facilities could be closed or in disrepair.  

Be prepared

It’s important to note that Congress can act to avoid or end a government shutdown. But it’s also important to have a plan in place so you are prepared for the unexpected, whether it’s a government shutdown or another event. Your financial advisor is there to help.