The Shutdown is Over — For Now. Here’s a Financial Plan To Get Workers Back on Track
The government agencies that were shut down are back in business, but the financial crisis it left behind for many federal workers and contractors isn’t over.
Yes, the 800,000 federal employees who were affected will get their back pay. But that doesn’t mean they’ll be made whole. Some had to borrow money, incurring interest charges. Others stopped paying bills, which could lead to late fees. Folks who were on an aggressive mission to pay down debt had to pull back.
Without pay, some federal workers felt they had no choice but to tap their Thrift Savings Plan (TSP), the government’s version of a 401(k). But if you take money out of your TSP before you reach age 59 1/2, you might have to pay an early-withdrawal penalty of 10 percent in addition to regular income tax.
Then there are the contract workers who won’t receive back pay. With many of them already living paycheck to paycheck, these workers will find it hard to recover. If they were contributing to a retirement plan through their employer, their contributions probably stopped with the shutdown. And they aren’t likely to make catch-up contributions.
Most troubling is that there’s still a threat of another shutdown in a few weeks. Congress passed only a stopgap funding measure that lasts through Feb. 15 for the affected agencies. Click here for full article.
This material is for informational purposes only. It is not intended to provide tax, accounting or legal advice or to serve as the basis for any financial decisions. Individuals are advised to consult with their own accountant and/or attorney regarding all tax, accounting and legal matters.