If you’re a federal civilian employee and believe you’re affected by the buyout proposal announced on Jan. 28, 2025, you might be wondering whether to take this offer and what financial implications it could have — particularly if you’re nearing retirement or are senior level. This article can help you navigate these considerations and make an informed decision.
What is known so far
President Donald Trump’s buyout proposal has been offered to more than 2 million federal civilian employees for up to eight months of salary if they reply to an email by Feb. 6, 2025, that they want to resign.1 The intention of this unprecedented move is to incentivize employees to return to physically working in the office five days per week, as well as significantly reduce the size of the federal workforce. The proposal does not extend to personnel in the military, Postal Service, immigration enforcement, or national security. The email sent by the U.S. Office of Personnel Management (OPM) informed workers that their position or agency was not guaranteed and could be eliminated.2
Who is affected
There are 15 executive departments under the president’s supervision and hundreds of agencies and commissions.3 The federal government employs approximately 3 million workers which make up about 1.87% of the U.S. civilian workforce.4 The agency with the most federal workers is the Department of Veterans Affairs with 486,000 people. The field with the most workers includes medical, hospital, dental, and public health with 363,814 people. The states with the most federal workers are California, Virginia, and Texas. Around 50% of federal workers have a salary between $50,000 and $109,999 annually, while 41% make $110,000 or more.3
Details of the proposal
The buyout proposal includes the following key points:5
- Eight months of salary: Employees who opt to resign will receive eight months of their current salary.
- Deferred resignation: Employees can remain on the payroll through Sept. 30, 2025, without having to work or physically return to the office, unless they choose an earlier resignation date, or an agency head decides they aren’t necessary for transitioning purposes. Employees may also keep accruing CSRS, FERS, or TSP retirement benefits during the deferred resignation period.
- Eligibility: The offer is available to federal employees and excludes those in immigration, national security-related positions, and the U.S. Postal Service.
You can find more details on the OPM website: FAQs.
Financial implications to consider
When deciding whether to accept the buyout offer, consider the following financial aspects:
1. Cash flow management:
- Immediate financial needs: Assess your current financial situation to determine the money you have coming in and going out, which will help you prioritize your resources and expenses for the short and long terms. Since you will receive eight months of salary, this may not be an immediate concern. But, you should prepare for the potential possibility of not finding a replacement job prior to the end of the transition period. You may also want to consider other areas of cash flow.
- Emergency fund: Ensure you have an adequate emergency fund to cover unexpected expenses during the transition period.
2. Retirement planning:
- Impact on pension: Understand the amount of your federal pension benefits to help determine how it fits into your retirement income goals, and whether you can retire or should continue working. Your pension amount will be based on a variety of factors including years of service and GS or SES level.
- Early retirement: If you elect to retire early, or as you would have normally, prior to the end of the deferred resignation period, it will override the deferred resignation election. The eight months of salary may be more than a potential bonus that could accompany other offers.
- Thrift Savings Plan (TSP): Review your TSP contributions and growth. You may need to adjust your retirement savings strategy accordingly.
3. Health care benefits:
- Continuation of coverage: Determine how your health care benefits will be affected. You may need to explore alternative health care options, such as COBRA or private insurance plans if you resign.
4. Job market and career prospects:
- Employment opportunities: Research the job market in your field and assess your prospects for finding new employment whether it’s in contracting, local government, nonprofits, or the private sector. Consider the potential for career growth and stability in a new role.
How to proceed
Deciding whether to accept the buyout offer is a significant financial decision that requires careful consideration for each individual. As trusted financial advisors to individuals and families for 40 years, Mercer Advisors can help you navigate this process. We connect the dots of your financial life by unifying financial planning, investment management, tax, estate, insurance, and more — and can guide you on how your income and benefits fit into your overall financial situation.
If you are a current client, please reach out to your wealth advisor to discuss cash flow implications, impacts on your retirement planning, and other financial considerations.
If you are not a client, we invite you to contact us for a complimentary consultation to support you in making this important decision. You’ll get a hand-picked advisor that has experience collaborating with federal employees on financial planning and retirement planning. Let’s talk.
1 “President Trump offers buyout to all federal workers with 8 months’ pay.” AP News, 28 Jan. 2025.
2 “Trump reportedly will offer buyouts to all 2 million federal workers.” Government Executive, 28 Jan. 2025.
3 “US federal workers: Key questions and employment trends.” Pew Research Center, 7 Jan. 2025.
4 “U.S. Executive Branch Departments and Agencies.” University of Washington Libraries, 22 Jan. 2025.
5 “Government-Wide “Buyouts”: Q&A on New Deferred Resignation Program.” FEDweek, 29 Jan. 2025.
