Last night, I listened to yet another NPR news story about how some of the federal employees struggling to pay mortgage, rent, prescriptions,etc Some people mentioned work for IRS, who you would think with implied financial discipline. It started me thinking that maybe because of the pension, those people don’t save much of their paycheck and that is why they are more paycheck to paycheck. I know maybe the pay in that sector is not great, but truly you can save money at any wages.
I agree with the emergency fund, but I also know that I have no idea what goes on under another’s roof. It’s easy to assume someone in financial trouble already during this shutdown is a spender who lives beyond his or her means or didn’t save enough, but I’d refrain from that insinuation.
I don’t know about that. I work in the private sector and have 2 pensions, one of 22 years from my former company that is growing until I turn 65 and one that is still accruing from my current employer. Nonetheless, I still try to save in my 401k at least the amount that is matched. However, I have never in 35 years of employment had an emergency fund of 6 months or more savings. Now, as I approach retirement, I may have reached the point where I will be able to have one but only because we are selling our second home.
I was downsized a dozen years ago, so I know what it’s like to go without a paycheck, sort of. I had severance and got unemployment, but my severance didn’t go into effect until more than a month and a half after I left the job because there was 45 day right to rescind my consent to the agreement, so the severance didn’t commence until that period expired. I had a 401k loan that came due and it was only because H (a realtor and attorney) sold a house and got a commission and because I used all of the savings I had then to pay the loan off that it didn’t turn into income and a penalty that year.
I think, however, that most of the rank and file workers in the government don’t make huge amounts of money. There is a trade off to being a government employee - you earn lower wages than private sector employees in comparable jobs, but you get better benefits into retirement. It’s similar to the trade off I made. I work for an insurance company as an attorney. I make less than my friends who work for outside firms, but most of them don’t have pensions coming.
I can’t imagine that most people would have conceived that this shutdown would go on for this long…
Apparently somewhere between 72-80% of Americans live paycheck to paycheck. It’s not a “gosh I have a pension so I don’t need an emergency fund” problem, it’s a society-wide problem.
I’m not into blaming this particular group of folks for not preparing better when most Americans don’t have $5000 in the bank.
I think government workers are like workers everywhere…some have lots of savings, others live paycheck-to-paycheck…everyone’s circumstances are different.
On the people being interviewed, i’m sure that some are teetering but others may simply be prudent…right now, they haven’t been paid in a month…but what if they’re not paid for two months. Or 3 months. Cutting back radically now could save some of these folks later.
(as a side-note, I come from a state department family and while some of those employees are at the top of their field and will stay in place, others might be tempted to explore other jobs/interviews during this month…there’s a feeling of not being respected right now among State and NASA and some of the higher scientific fields and it wouldn’t be surprising to see some of them jump…to the country’s detriment).
There are lots of different circumstances. My D has a friend that graduated last year and just started a job with the FBI. She has no savings yet and she’s not getting paid. Her parents are making her rent payment for her. You think your kid has graduated and landed a good job and then this happens.
Let’s not judge. I would have a hard time right now missing 2 paychecks: two in college, medical issues last year with a high deductible plan that really ate into my savings, and a car that died. Man plans and God laughs. I hope this ends soon, as people are really getting hurt.
Retirement? No doubt those with pensions save less for retirement as a percent of income. Most believe that the pension will be there when they retire. In the event that it is not, or the benefit is reduced, they believe Social Security will make up the difference.
Emergency fund? I suspect there is little difference in savings rate for that purpose (though I can’t find any data on that topic). From a behavioral economist perspective, those with pensions should view it as a benefit (a gain), whereas those with defined contribution plans view the deductions from their paycheck as an up front loss. So the pension person should be more willing to save at the point of receiving their paycheck. However, most folks on pensions are government employees who are earning less compared to their private sector equivalents and will likely consider less of their paycheck available for savings. So comparing the pension person who perceives less ability to save with the defined benefits person who perceives less willingness to save…I expect both end up saving at the same abysmal US savings rate.
IRS employees start at $27,000 a year. One of the people interviewed for the article I read had a 98 mile daily commute. There’s only so far that fiscal responsibility will stretch a dollar.
I thought the federal retirement system has changed how it works, and newer employees are under a different system than the older ones. Can someone knowledgeable on this please advise.
I work as a contractor for a large government agency and have for over 30 years. Many of my coworkers are civil servants and have been furloughed or are working without pay. In my group 2 of them have been here less than a year and they do not have even a month’s savings yet, new college grads. Another just spent all of his savings on a child’s cancer treatments. Many others spent most of their savings recovering from Harvey. DO NOT JUDGE! We only have until Feb 8 and the contractors (double or triple the civil servants) will run out of money. We do not make a lot but do this job because we love it. (We have enough savings but also have many expenses). Every case is different. Oh and many of us are engineers, computer science majors, science majors etc. All the lower paid cafeteria workers have been furloughed since day one. Most of them don’t have savings. They make just above minimum wage. I know these people and care about them. It isn’t that they don’t think about it. Who plans for Harvey! Even those with insurance had to pay out months of their salary to recover.
It’s not just the GS workers, who make suprisingly less than many of us assume and sometimes live in high cost of living areas, that this is affecting.
This is so much bigger than just those 800,000 government workers who aren’t getting paid right now.
Government contract workers - including people like custodians and kitchen staff at every closed facility in DC are not getting paid and will not recieve back pay. This trickles into every facit of the cities and towns where government jobs are big parts of the economy. People directly affected cut down on expenses, and local businesses suffer. What do you cut out? Movies, eating out, hair cuts, nails, clothing, fun extras… Local businesses are also suffering.
The DC Metro system is losing $400,000 every day of the shutdown.
An interesting news (Rachel Maddow) segment this week showcased the long term effects on all government workers who are required to pass financial background checks and security clearance renewals throughout their careers. Federal law enforcement, the FBI, etc. can all have problems with security clearances due to financial problems caused by this shutdown. Something I had not considered.
FBI agents will lose their dental and vision insurance coverage as of next week.
Not a federal employee, but as I don’t have a pension, (my employer ceased to provide one mid career for me) I have worked hard to divert a good percentage of income to my 401K, to the detriment of cash savings. I would think I am not alone in this. College planning encouraged this to an extent, as FAFSA tends to penalize those with cash savings.
It is unfortunate that this furlough happened at the same time as a stock market dip. But that means little to those making barely above minimum wage.
On a more personal level, we have a government pension (military, 27 years active duty, aiming to make it to 30), but also have several personal IRA’s an inherited IRA and other investments and savings. But we are in a position to do so because my husband recieves huge bonuses every year due to his specialty (physician). It isn’t fair to compare our situation with that of any of the enlisted personel who also work at the same hospital, live in the same area, but don’t have the specialty bonuses, or anywhere near the base pay we get. They are certainly living paycheck to paycheck.
We are lucky not to have any debt, no student loans, no mortgage, very few recurring monthly payments at this stage of our lives. The GS hospital workers who have been sidelined as nonessential (example, the medical research library is shut for the duration) are hurting.
To be clear, the active duty military is fully funded and not directly affected by the shutdown.
Many employees with defined pensions still need to save aggressively to afford a comfortable retirement. Pension income rises gradually with years of service, so unless someone knows they will spend 20-30 years at the same job they can’t rely solely on their pension. If they’re saving for retirement in a 401k or IRA, that money is off the table for them due to penalties for early withdrawal.
Current fed pension plan is 1% of the average of your highest five years times years of service. Thankful to be eligible for it, but still need to throw as much as possible into the 401k.
DH is on furlough, but we are ok. Only in the past couple years we could say that.
Had this discussion with B and SIL two nights ago, who said TSA employees are living in fancy houses and driving expensive cars. Not on $16/hr, folks! (I looked up the payscale.) There are many fed EEs, esp in high COLA areas, who are hurting. Childcare, commuting and bills still roll in without a paycheck.
My concern is for my neighbors and friends whose businesses rely on fed EEs paying for plumbers haircuts, daycare, etc. Those folks aren’t going to be made whole.
“it’s about a little more than a dollar per hour more than the median hourly wage. But that TSA salary certainly isn’t much to run a household on – the median household income was $57,652. An MIT study this year calculated the a living wage for a family of four would be $66,842 for two working adults and two children. But that figure doesn’t take into account location. A living wage can rise to over $80,000 for a family of four in urban areas.”
My news could be wrong but my understanding is that health insurance premiums will need to be paid out of the furloughed workers pocket as of the 1st of February.
I am very happy about the direction of this conversation. That’s it’s hard for lots of people when missing paychecks. And that there are employees who have very different paths and very different stories as the government shutdown continues.
I do wonder why there is this narrative and where it’s come from (I’ve seen this conversation serveral places) to put some blame on the furloughed workers because they haven’t adequately saved for such an event?