Federal Employees Bracing for Second Round of Sequestration, First Command Reports

FORT WORTH, Texas – The majority of federal employees and their families doubt that lawmakers will take appropriate actions to avoid a second round of sequestration in the coming year, according to the First Command Financial Behaviors Index®

In a late September survey taken immediately before the government shutdown, 90 percent of middle-class federal employee families (those with household incomes of at least $50,000) said there were not confident that lawmakers will be able to take appropriate action to avoid another sequester in the new fiscal year, which began Oct. 1. This lack of confidence compares to 83 percent of military and 73 percent of general population families in the same income range. 

“While Congress has taken some actions to protect military pay and benefits, the weight of sequestration, government furloughs and federal budget cuts is falling hard on our federal workers,” said Scott Spiker, CEO of First Command Financial Services, Inc. “In recent years federal employees have seen their pay rates frozen. Many have experienced furloughs without pay, either during the summer or the current government shutdown or both.”

Seven out of 10 federal workers report that government furloughs have negatively affected their families. When asked about the effects of the furloughs that took place before the government shutdown, respondents said they:

• Did not receive bonuses due to spending cuts (44 percent)
• Experienced hiring freezes (35 percent)
• Experienced unpaid furlough days (33 percent)
• Were restricted from working overtime due to cuts (30 percent)

Notably, roughly three out of five federal employee families say they feel extremely or very anxious about sequestration. They have been responding in a variety of ways, including:

• Cutting back on every spending (51 percent)
• Increasing the amount they are saving (17 percent)
• Decreasing the aggressiveness of their investments (11 percent)

First Command Financial Advisors report they are seeing an increase in federal employees seeking financial guidance and support. 

 “Not only have recent events caused federal employees concern about their current financial situation, they are now more uncertain than ever in their ability to achieve their long term goals and dreams,” said Robin Jones, CFP®, who is head of the company’s Evans, Ga., office. “We are seeing a significant increase in interest by federal employees in working with a financial advisor and gaining more knowledge about their benefits.”

John Olson in the company’s Annapolis, Md., office said sequestration is testing the household budgets of federal employees.

“Clients are taking a hard look at their finances and in many cases they are bumping up their savings rate,” he said. “They want to make sure if anything like this happens again in the future, they will be ready.”

In First Command’s Silverdale, Wash., office, Peter Carlo is seeing a lot of concern and worry among federal employees who support the Department of Defense in Kitsap County, Wash.

“Many of these folks are prior military and have come to expect their government pay checks like clockwork,” he said. “Even though they were told these possible conditions may occur, it is very hard to change habits.  Those who truly listen and accept our coaching have taken precautions and are prepared.  Many, however, are not prepared and fear losing their homes and their ability to cover their monthly requirements.  I have received many calls to discuss how to maximize monthly cash flow. Clients are stopping their investments and asking for clean budget sheets to be sent to them so they can take a hard look at the bills that must be paid versus the bills that can wait. Some are just plain angry and scared. It is a time when everyone needs to constantly make those daily decisions on what to buy and what not to buy.”

Bob Hill, head of the company’s Arlington, Va., office, said he’s seeing a significant number of federal clients seeking help with their retirement plan investments.

"Some federal workers are asking us to temporarily reduce or discontinue their regular contributions in order to keep their household budgeting on track," he said. “We’ll continue to work with them to ensure that they revisit their financial situation and, when the time is right, resume the pursuit of their long-term goals.”   

The Index surveys have consistently revealed that financial planners can have a positive impact on feelings of financial security and confidence, Spiker said.

“Financial planners coach their clients to spend less, save more and adopt other positive behaviors,” he said. “They can play a critical role in helping middle-class families achieve both near- and long-term goals in the pursuit of financial security and feeling more confident about the future. They are ideally equipped to assist federal employees  in their efforts to get their family finances squared away during this uncertain period.”