How Advisors Can Help Clients Hurt by the Government Shutdown

Advisors may not have to worry about missing a paycheck during the government shutdown, but some of their clients do.

The shutdown affects millions of federal employees, who have either been furloughed or continue to work without pay, and the implications are drastic: Workers will miss upward of $21 billion in back pay if the closure continues into December. Advisors need to be aware of the unique planning needs of federal employees and what impact the missed income may have on their retirement savings. “This is creating a ton of uncertainty, and navigating this uncertainty can be very stressful for these individuals,” said Thom Hall, a managing director at Carson Wealth’s Murray, Utah location, who works directly with federal employees. “They will have to find ways to manage their cash flow with no pay.”

Basic Training

The main way advisors can address these workers’ needs is by helping them create a robust nest egg. A best practice is to treat the missed or delayed paycheck as an “income gap,” said Hall. Also, be prepared to forgo any further income until the government reopens. That means prioritizing essential expenses like housing, utilities, food and health insurance premiums, he added. There are also indirect sources of help for federal workers. “Non-monetary support through food banks, community assistance programs, health and mental health support to address the increase in stress from financial strain can all make a difference,” Hall said.

Depending on the government organization involved, some resources may be available to help. Members of Congress, Supreme Court justices and federal judges continue to receive paychecks, as well as about 830,000 federal workers whose compensation comes from spending packages. 

Advisors of federal employees can also:

• Assist with accessing unemployment insurance, relief programs aimed at federal workers during the shutdown, state or local assistance programs and federal employee support organizations.
• Help track federal agencies’ human resources or Office of Personnel Management guidance page to monitor the status of clients’ pay or back pay.

AWOL Paychecks. Unfortunately, not even the military is safe. Active-duty military received Nov. 1 paychecks, but that doesn’t guarantee the next round. “A lot of military, for a long time, thought they were bulletproof as far as needing an emergency fund because they’re like, ‘The military always gets paid,’” said Joe Brown, a financial planner with the Military Financial Advisors Association specializing in active duty military personnel and veterans. “Well, [during] the last shutdown, the Coast Guard did not get paid for a couple of paychecks.”