Federal Buyouts: Are You Financially Secure or Swimming Naked?

Are You Swimming Naked? Are Federal Buyouts Are Exposing Financial Vulnerabilities?

Are Federal Buyouts Revealing Financial Weaknesses Among Employees?

Warren Buffett once said, “When the tide goes out, you see who is swimming naked.” In other words, when financial challenges arise, we quickly discover who has been living without a safety net. While this phrase is often used in investing, it applies to personal finance, too—especially for federal employees facing uncertainty due to recent buyouts and job eliminations.

The Bigger Picture: Financial Security and Federal Buyouts

Financial planners often reference Buffett’s wisdom because it highlights a crucial reality: security isn’t just about a steady paycheck. If you lost your job today, could you pay your mortgage? If a financial emergency hit, would you be prepared—or just hoping for the best?

For years, federal employees enjoyed job stability, reliable income, and strong benefits. But now? The tides are shifting. Recent news about federal buyouts and potential job cuts has left many feeling anxious and uncertain. It’s time to ask: Are you financially secure if the worst happens?

Are You Financially Prepared for Change?

Rather than analyzing whether you should take a buyout, let’s focus on a more critical question:

• Are you financially prepared for job loss?
• Can you afford to take a buyout?
• Are you ready for increased expenses if you must return to a physical office full-time?

A prolonged period without income is one of the biggest financial risks you can face. If you’re uncertain, now is the time for a financial wellness check.

We can’t predict the future, but we can prepare for it. Here are two essential steps to ensure you’re covered when the tide goes out.

Step 1: Strengthen Your Emergency Fund

Why Three Months of Savings Won’t Cut It

Conventional wisdom from some of the largest financial pundits suggest saving three months’ worth of expenses for emergencies. While that’s fine for minor setbacks, it’s not enough for job loss. If you’re out of work for six months or longer, three months’ savings won’t protect you.

Instead, aim for a full year’s worth of income in liquid assets. Not locked in your TSP or IRA—but easily accessible savings or investments.

Consider This:

If you earn $100K and have $100K saved in liquid assets, would your view on buyouts change? Instead of panic, you might think: Maybe I finally start that business or transition into a new career.

So, how do you build this fund? You may need to redirect some of your TSP contributions to bolster short-term security. While it might seem counterintuitive, increasing liquid savings now can protect you from raiding your retirement accounts later—where taxes and penalties can cost you dearly.

Step 2: Know Where Your Money Goes

No More Mystery Expenses

As a financial planner specializing in federal law enforcement professionals transitioning into retirement, I’ve noticed that many people don’t truly know their monthly spending.

For example, when I ask clients how much they need per month in retirement, many guess. This uncertainty isn’t just for retirees—it applies now, especially with buyouts and job cuts looming.

Four Quick Ways to Improve Your Cash Flow Right Now:

1. Find Forgotten Expenses – Unused subscriptions, forgotten free trials, and small recurring charges add up. Audit your statements and eliminate wasteful spending.
2. Reevaluate Large Discretionary Costs – Do you have a gym membership you barely use? A boat you take out twice a year? If a buyout or job cut is possible, reconsider these expenses.
3. Identify Overspending Areas – Dining out, entertainment, or shopping habits might be draining your budget. Some people unknowingly spend 10% or more of their income on restaurants alone.
4. Calculate Your Survival Number – Determine the absolute minimum you need each month for necessities like housing, food, and utilities. Knowing this number helps you understand how long you can financially sustain yourself if needed.

Even if you don’t expect to take a buyout, these exercises build financial resilience.

Final Takeaway: Prepare Now, Stay Secure

Having worked with federal employees for over 20 years, I’ve never seen a landscape quite like this. The uncertainty is real. But Buffett’s wisdom reminds us: the tides always turn.

The question is: Will you be prepared when they do?

For federal employees, the tides are shifting—but now is the time to strengthen your financial plan. Taking proactive steps today can prevent future stress and provide peace of mind for whatever comes next.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.