The federal workplace is being upended by layoffs and reductions in force, but, with whispers of a recession looming, is 2025 a good time to retire? There’s no one-size-fits-all plan. It ultimately depends on your finances, economic conditions, and the stability of your position in the federal workforce.
3 Indicators of a Recession
Consumer Confidence
If consumers decide to pull back on spending in 2025 — a signal that they’re facing financial strain — the economy might slow. That could hit your Thrift Savings Plan (TSP), especially the C Fund (stocks), right as you start pulling money out. If spending holds up, your TSP might be fine.
Business Investment
If companies cut back on investing in growth and innovation, it could mean they’re nervous, slowing TSP gains. That’s rough if you’re aiming for a big nest egg. But if they keep spending on tech or projects, your TSP could still grow, helping your retirement leap.
Labor Market
More unemployment or flat wages might signal trouble, dragging down your TSP as you retire. If jobs stay strong, your TSP might stay strong and the withdrawals won’t erode your balance as quickly.
Mass Layoffs: Stay or Go?
Mass layoffs are shaking the federal workforce in 2025. Thousands of probationary feds are already out (but could be reinstated by court order), and agencies have submitted plans for large-scale reductions. Uncertainty’s high: some layoffs got reversed, others loom. Should you stay, hoping your seniority or SCD saves you, or go now, locking in your FERS and TSP? It’s a gamble — staying might mean a sudden exit later – leaving might result in a more turbulent introduction to retirement.
What’s Up for Feds in 2025?
- The Fed might lower rates to 4.25–4.5%, boosting TSP stocks but trimming G Fund gains (2-3%). High rates help G Fund but could slow stocks.
- FERS and Social Security rise 2.5%, but that percentage will surely be outpaced by inflation on consumer goods.
- After a hot 2024, the market is experiencing volatility. Starting withdrawals in a down market results in losses that could severely impact how long your money will last.
Your Fed Perks
FERS, FEHB (healthcare stays), and TSP give you an edge. Hopefully, you’ve been taking advantage of the max 5% TSP match and the ability to make “catch-up contributions.” Make sure you’ve met the continuity requirements for carrying FEHB into retirement – it’s a huge perk as the government continues to cover roughly 75% of your premium.
Is 2025 Risky?
No huge warning for 2025 yet. Growth might slow (3% to 2%), and layoffs add jitters. But FERS, FEHB, and TSP options, like L or G Funds, support you. Chat with a Federal Retirement Consultant® if you’re unsure about your retirement readiness. They can run the numbers and help you retire with confidence.
