“Growing numbers of federal workers have been tapping their retirement funds in a sign of how the government shutdown is squeezing day-to-day finances,” Bloomberg reports.
The news service examined Federal Retirement Thrift Investment Board data, “which show a 34 percent increase in the number of hardship withdrawals in the two and 1/2 weeks after Christmas when compared to the same period last year.”
The data goes through Jan. 14, the first weekday after many federal employees missed paychecks.
“The outflows mostly come from investments run by BlackRock Inc., the sole manager for four of the Thrift Savings Plan’s five individual funds,” Bloomberg notes.
Thrift Savings Plan spokeswoman Kim Weaver said she couldn’t compare the withdrawal rate now to those during previous U.S. government closures, though she told Bloomberg there was a “surge in hardship withdrawals in October 2013.”
During that shutdown, more than 14,000 plan participants took hardship withdrawals, and that year ended with a decade-high number of loans and such withdrawals.
“The longer the shutdown lasts, the more withdrawals we’d expect to see,” Weaver told Bloomberg.
TSP’s Weaver added that “during the market’s tumultuous fourth quarter, many participants shifted money out of the funds managed by BlackRock to the one that invests in short-term Treasury bills.”
The federal plan had about 5.5 million participants as of Dec. 31.
The news comes as reports of retirement disruption due to the shutdown grow.
Thankfully, OPM Retirement Services, which handles retirement matters for federal workers, is funded by the trust fund it manages and not appropriations, and OPM Retirement Services employees will still be working normal operating hours during a government furlough.
For employees who would have retired during a shutdown furlough, those that submitted some notice of their desire to retire, agencies should, when the lapse in appropriations ends, make the retirement effective as of the date requested.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
