Furloughs and Your Retirement

The impact of a shutdown on the Thrift Savings Plan.

Well, it’s furlough time -- or, as my friend Herb Hayes calls it, “furl-ouch.” Suddenly, every day feels like a snow day. But where I live in Northern Virginia, the sun is shining and it’s as hot as a summer day in mid-July. When government shutdowns happen, it is not as much fun to have a day off as some people seem to think. The emotions are many: fear (will I be paid?), curiosity (how is everyone handling the situation?), and anger (why would our government allow this to happen?).

While I’m not currently a federal employee, I am a government contractor who also is affected, because there are no employees at work to attend my pre-retirement seminars. I always try to look on the bright side of any situation, but there are many people -- feds as well as those who depend on the government to stay in business -- that will not see any bright side to this situation.

Among the many concerns that federal employees have right now is what will happen to their Thrift Savings Plan investments. Here are a few TSP tips and facts to consider in a shutdown scenario:

  • Read this TSP fact sheet: Impact of a Federal Government Shutdown on the Thrift Savings Plan. It says that investment activity will continue. Share prices and account balances will continue to be updated every business day. Loans and withdrawals will continue to be disbursed.
  • Check out another fact sheet, Sequestration and Your TSP Account, if you’re wondering how to free up some of the money sitting in your TSP account to cover your day-to-day expenses.
  • Remember that furloughed employees cannot contribute to their TSP accounts during a shutdown, and agency contributions also stop. (More information is here.) If you’re thinking about stopping contributions or decreasing the amount that you are saving after you return to work, keep in mind that traditional TSP contributions affect your tax withholding. If you reduce your pre-tax contributions, then you are increasing your taxable income by the same amount. Also, remember that FERS employees receive matching agency contributions on the first 5 percent of salary contributed each pay period. Try not to go below a 5 percent contribution, so you don’t lose the agency match.
  • Even though you may be in an intermittent loss of pay status, you can borrow from your TSP to cover some of your expenses during a furlough. A short-term break in pay would still allow a TSP participant to begin payment by payroll deduction within 60 days of the loan issue date. If the shutdown went beyond 60 days, then the participant would be responsible for making loan payments. Loans are not considered in default until you’ve missed 2 ½ payments.
  • You can also apply for a hardship withdrawal, but you will not be able to make any TSP contributions for six months after receiving your payout. You also will have to pay income tax on the taxable portion of any withdrawal and possibly a 10 percent early withdrawal penalty as well.
  • The government cannot take money from your TSP account, because this money is held in trust for its participants. If the Treasury Secretary determines that the government securities G Fund cannot be fully invested without exceeding the federal debt limit, Treasury can suspend investments for all or part of the G Fund on a daily basis, but is required to make the fund whole after the debt limit has been increased. TSP Director Greg Long has sent a message to plan participants explaining the effect of the debt ceiling on the G Fund. He’ll be a guest on the “For Your Benefit” radio show on Federal News Radio at 10 a.m. ET on Monday, Oct. 7.
  • If you want to contribute the full elective deferral limit of $17,500 for 2013 and have selected a percentage amount to be withheld from your pay check for your TSP contributions, you may not reach the full $17,500 due to furloughs. If you need to change the amount of your TSP contribution each pay period, you can submit a new election form or use your agency’s online service to make changes to your allotment. Remember that FERS employees only receive matching contributions from their salary if there are employee contributions. If you “max out” the elective deferral limit before the last pay period, you will lose your matching agency contributions.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.