Study Offers Financial Lessons to be Learned from the Government Shutdown

A recent survey offers financial lessons that not only federal employees, but all Americans can take away from the recent government shutdown.

Prudential Financial recently published the results of a survey the company conducted of federal employees who were impacted by the recent partial government shutdown to look at the details of how it impacted their finances. Obviously, the shutdown had a negative impact, but the study went deeper to look at the details of how federal employees both responded to and dealt with going without paychecks during the longest shutdown on record.

Prudential Financial surveyed more than 350 federal employees and contractors who went unpaid during the shutdown, as well as spouses of such workers. The survey was conducted from January 29 through January 31. It found some troubling results, but also some more positive ones.

Survey Results

In addition to being under more stress, federal employees surveyed said that their personal finances took a hit which included comprising their retirement savings in many cases.

27% missed a mortgage or rent payment, 13% fell behind on student loans, and 10% missed a tuition payment.

26% of respondents said they dipped into their retirement accounts to pay bills or manage other day-to-day expenses during the shutdown, either by borrowing from their account or taking an outright distribution.

Despite these problems, federal workers who were surveyed went into the shutdown better off than most Americans according to what Prudential found. The survey results note that 61% of respondents entered the shutdown with $1,000 or more in emergency savings versus 40% of the general population that reported having no emergency savings in a separate survey the company conducted during the same time period.

While having the emergency savings helped, many respondents still reported going through their savings during the shutdown which lasted just over a month (34 days). 62% of surveyed federal workers and spouses said they depleted all or most of their emergency savings during the shutdown; 31% spent less than half their emergency savings, while 8% said they didn’t spend any of their savings.

The federal employees in this survey were apparently much better off than most Americans, not just based on the general population survey, but also according to the findings of a survey released last year by Bankrate which found that roughly 55 million Americans have no emergency savings whatsoever.

Greg McBride, a chief financial analyst with Bankrate, said at the time, “Many Americans are kidding themselves if they have less than three months’ worth of expenses in emergency savings and claim to have any level of comfort with that.”


Prudential Financial offered some takeaways from the survey results. The company wrote, “The impact of the government shutdown on federal workers and their families serves as a stark reminder that many Americans are ill-prepared to navigate even a brief disruption in their income. While absolute levels of income play a role in preparation, the survey suggests there are measures individuals could take to better insulate themselves against future income disruptions, whatever their cause.”

52% of federal employees surveyed said they plan to add more to their emergency savings, and 10% who said they currently have no emergency funds plan to start building them.

Other respondents are planning to get jobs outside of the government as a result of the shutdown. 4% had already left, 34% were actively looking, and 35% were considering leaving the federal government but not actively looking for another job.

The shutdown apparently got the attention of some outside of the federal workforce as well who report they are taking action to beef up their emergency savings. 34% of the respondents from the general population survey said they plan to begin building an emergency fund, and 11% who don’t currently have one plan to start one.

Advice from Financial Advisors

Financial advisors often recommend having emergency savings for these types of occasions when life events inevitably happen, be it a job loss, medical event, or major expense such as a car breaking down. Often this will be at least three months worth of household expenses, but some suggest ultimately striving for as much as a year’s worth depending on one’s personal situation.

McBride, for instance, recommended having at least three months worth of emergency savings set aside for emergencies, and more for single income households.

The risk of not having any savings for an emergency is that when one inevitably comes up, it forces people to take money from other places, such as withdrawing from retirement savings, as the Prudential Financial survey showed happening. Besides unplugging and hampering the growth potential on a long-term investment, there are usually fees and penalties associated with early withdrawals from retirement savings plans.

The TSP, for instance, notes that early withdrawals are potentially subject to both taxes and penalties:

Your financial hardship withdrawal is considered a non-periodic payment for Federal income tax purposes. The TSP will withhold 10% of the taxable portion of your withdrawal for Federal income tax unless you increase or waive the amount of withholding.

Also, if you make a financial hardship withdrawal before age 59½, you may be subject to a 10% early withdrawal penalty tax on the taxable portion of your withdrawal. This penalty tax is in addition to the ordinary income tax you will have to pay.


A financial advisor can work with you to develop an overall financial plan that includes both short-term savings and long-term retirement planning.

About the Author

Ian Smith is one of the co-founders of He has over 20 years of combined experience in media and government services, having worked at two government contracting firms and an online news and web development company prior to his current role at FedSmith.