Navigating OPM’s Deferred Resignation: What Federal Employees Need to Know

It has certainly been an eventful week in Washington, D.C. Our inboxes have been inundated with questions from the federal community regarding OPM’s deferred resignation email titled Fork in the Road. Understandably, federal employees are concerned about what this means for their financial future and how they should respond.

With only a week to decide, many are feeling immense pressure and uncertainty about the potential impacts on their families and retirement plans. I’ve spent the week speaking with attorneys and federal employees, and I want to shed light on what we currently know and highlight the key financial questions you should be asking.

Debunking the Myth: Will You Lose Your Benefits?

One of the biggest misconceptions circulating is that employees will lose all their benefits if they accept the resignation offer. The truth is that you will not lose benefits you are already vested in.

For example, your Thrift Savings Plan (TSP) contributions remain intact. Years of creditable service already paid into the system are still yours. The only way to forfeit these benefits is through extreme cases, such as acts of treason.

However, this does not mean you will retain all benefits. A crucial question to ask yourself is whether you are already eligible for an immediate, unreduced pension. Some benefits, such as federal health insurance (FEHB), depend on this eligibility. If you leave before meeting the age and service requirements, you may risk losing key benefits or facing pension reductions.

Is This a Buyout or a VERA/VSIP?

As of the filming of our video, this resignation offer was not an official offer, nor did it appear to be part of a Voluntary Early Retirement Authority (VERA) or Voluntary Separation Incentive Payment (VSIP). Since then, however, there is new information suggesting that VERAs will be authorized at agencies for employees to consider.

If you are a younger federal employee, without VERA you must carefully consider whether leaving service before reaching the required retirement age will impact your benefits eligibility. OPM’s FAQ section clarifies that if you do not become eligible for retirement before September 30, 2025, your situation will be evaluated on an individual basis—meaning there is no guarantee of a waiver.

Adding to the uncertainty, the email also hinted that restructuring may lead to job eliminations in certain agencies. If your job is eliminated, your retirement and benefits eligibility could be affected even if you do not accept the resignation offer.

Legal Considerations: What Are You Agreeing To?

Many employment attorneys and labor law experts we’ve spoken to are questioning the lack of clear language in the resignation offer. Some concerns include:

• Are you waiving any rights as a federal employee by signing?
• If layoffs or RIFs occur next month, will those who agreed to resign still be protected? Recent emails from leadership indicates not, but is there legal backing?
• Would it be safer to take the risk of potential layoffs rather than agreeing to resignation?

Since then, new mass emails have been sent out indicating that RIFs will not affect those, to include a draft of a legal agreement.

To be clear, I’m a financial planner and advisor to federal employees, not an employment attorney. I highly recommend consulting legal professionals before making a decision.

Financial Planning for Uncertainty

One of the biggest questions federal employees are asking is: What happens if I don’t have the income I was planning for? The key to financial security in times of uncertainty is cash flow management.

A strong emergency fund is your first line of defense against unexpected financial disruptions. Here are some general guidelines:

• Single-income households: Keep at least six months’ worth of expenses in cash or a high-yield savings account.
• Dual-income households: Aim for three to four months’ worth of expenses in emergency funds.

Additionally, consider your personal circumstances:

• Does your skillset make it harder to find another job?
• Do you have upcoming large expenses, such as tuition or medical bills?
• Would a job loss force you to make difficult financial trade-offs?

Many federal employees are taking this week to sit down with their families and reassess their monthly expenses, distinguishing between needs and wants to determine how much financial flexibility they have.

Investment Strategies and TSP Considerations

Another pressing concern is: How should I adjust my TSP and other investments? The right answer will depend on your personal risk tolerance and financial goals, but here are some general principles:

1. Be prepared for market volatility. If you lose income and lack emergency savings, you may be forced to withdraw investments at a loss if the market declines.
2. Ensure your portfolio is aligned with your timeline. If retirement is near, consider having a more conservative allocation in your TSP.
3. Use a bucket strategy. Keep short-term cash needs separate from long-term investments to avoid withdrawing from the market at an inopportune time.

Are You Emotionally Ready for Retirement?

For some, this situation may simply accelerate an already planned retirement. If you are financially prepared, the next question is: Are you emotionally ready to retire?

Have you thought about how you will spend your time? Do you feel ready to step away from the mission-driven work you’ve been doing? Have you planned for the lifestyle changes retirement will bring?

Retirement is rarely a straight path from Point A to Point B. Life events, like this resignation offer, often require course corrections to ensure you maintain the lifestyle you want and stay on the trajectory you envision for yourself.

Federal employees only get one shot at making their retirement successful. With the uncertainty surrounding OPM’s deferred resignation email, careful financial planning and legal due diligence are crucial.

Take the time to evaluate your options and make a well-informed decision that secures both your short-term financial stability and long-term retirement goals.