The buyouts and layoffs of federal employees initiated in January 2025 might lead you to move into the private sector. Going through a career transition for any reason can be scary but switching from the public sector to a corporate job comes with a particular set of considerations.
In addition to the difference in benefits, transitioning from a federal government job to a career in the private sector (generally a corporate job) can come with a variety of changes you didn’t expect. From negotiating your salary to adjusting retirement savings amounts and planning for potential bonus payouts, you’ll find that some of these differences might suit you, but they could also create new financial decisions that require careful planning.
Before you have to make these choices, though, you may be experiencing or preparing for a big drop in household income if your job gets terminated, while also brushing up on your interviewing skills and looking for the right job opportunity. Survey results show that the top barrier to a career change is lack of financial security, and the next biggest challenge is being unsure which field to enter.1 Those statistics could apply to anyone navigating a change in their career, whether chosen or not.
Below, we’ll explore choices you may face before and after transitioning to the private sector and how your decisions could impact your financial success.
Adjusting to a loss in income
First of all, if you’ve lost your job or anticipate being let go in the near future (such as due to the January 2025 buyout), take steps to help minimize the impact on your financial security. Be sure to get all the information you need from the Office of Personnel Management (OPM) or your employer to help determine your income and benefits going forward.
- Unemployment: Depending upon the terms of your termination, you may be eligible to submit a claim to the Unemployment Compensation for Federal Employees (UCFE) program. However, getting benefits may take a while so you might need to rely on other resources for income.
- Assets and debts: Review your budget to identify areas where you can reduce spending, such as subscriptions or other discretionary expenses. Assess how long your emergency fund, and potential FERS retirement benefit or annuity supplement, can sustain you. Contact creditors to explore options for reducing or deferring payments. If you have a Roth IRA, you can withdraw contributions tax- and penalty-free to supplement your cash flow. Additionally, you may be able to access funds through a home equity loan or line of credit if you already have one in place. A Thrift Savings Plan (TSP) loan repayment might be an option. However, once you separate from federal service, you’ll need to set up monthly payments and pay off the loan by the required deadline. Distributions may be subject to a 10% early withdrawal penalty if you haven’t reached age 59 ½ or if you fail to meet the loan repayment deadline. Be sure to explore all options and consider tapping into retirement savings as a last resort, as it could have a detrimental impact on your long-term financial stability.
- Health care: Determine whether you and your family members are eligible to stay on the Federal Employees Health Benefits (FEHB) program through TCC (temporary continuation of coverage). If you’re married and your spouse has a health care plan through their employer, you may be able to join that plan. You might also be eligible for insurance on the Health Insurance Marketplace®.
- Retirement savings: Consider keeping your money in the TSP or rolling it over into an IRA, which likely has more investment choices. If you keep the money in the TSP, you can decide later whether it’s beneficial to roll it over into your new employer’s retirement savings plan. Remember that if you cash out before age 59 ½, there’s a 10% early withdrawal penalty. Weigh your options carefully to avoid long-term consequences.
Preparing for a job in the private sector
Source: U.S. Bureau of Labor Statistics
The prospect of finding a private sector job may seem daunting, but many skills gained in government roles, such as project management, regulatory knowledge, and leadership, are highly valued in the private sector. Take some time to educate yourself on fields that interest you. Identify how your government experience, particularly universal skills and achievements, can transfer to private sector roles and communicate them effectively in an interview. You are likely to be asked to give examples of situations you successfully handled in your job. Focus your resume on outcomes and impacts you’ve made, and keep it concise — no more than two pages. Research companies and their culture to find the right fit — remember, you are also interviewing potential employers. Maintain a networking mindset and actively engage in industry events, social media, and associations.
Private sector compensation packages can vary widely. Consider salary, potential bonuses, equity options, health benefits, and retirement plans when evaluating job offers. Don’t be afraid to negotiate your salary. You may also be able to negotiate on benefits depending on your job level. Research the industry standards for a position to ensure you’re getting a fair offer. While salary is certainly important, this may be a good opportunity to honor your work-life balance needs with a job that’s a better fit.
Navigating financial decisions when you’re offered the job
Typically, once you receive a job offer in the private sector, you’ll quickly be asked to make financial decisions related to benefits. You may also experience changes in cash flow, depending on your new salary and other compensation. It is important to understand how your choices will affect your short- and long-term financial goals.
- Insurance: Your employer may offer a health insurance option for a high deductible health plan (HDHP), which could be paired with a health savings account (HSA). Similar to a retirement savings plan, HSA contributions are not taxed, and your account grows tax-free. Distributions are also tax-free when used for qualified medical expenses. This benefit can be particularly useful in retirement when medical expenses can significantly increase. Note that an HSA is different from a flexible spending account (FSA), where your contributions do not get invested. Additionally, your employer may provide life and disability insurance. Other benefit options might include pet insurance or legal plans. Note that your premium, coverage, and co-pay amounts may differ greatly from the federal plan you had.
- Retirement plan: Corporate jobs don’t generally come with pensions like FERS, so the contribution amount to your employer-sponsored 401(k) or IRA may need to be different from your TSP to meet your retirement objectives. If you know your FERS amount from your federal position, whether or not you’ll be taking the benefit or supplement, it can be factored into how much you might want to save for retirement. There are typically many more investment choices with employer-sponsored retirement plans than with the TSP. You may need to choose your own investments or your employer might put you into their chosen funds. If you want more control, consider hiring a financial advisor to actively manage your account. For instance, at Mercer Advisors we have a program called Account Bridge which helps us advise on your employer-sponsored retirement account as well as other areas of your finances.
- Bonuses: In addition to possible cash bonuses from your employer, you may receive rewards with stock options during your tenure. If you receive a significant cash bonus, you may feel like spending it right away, but there could be other financial areas to address, such as paying off debt or investing for a child’s future college expenses. With stock options, there are tax implications to consider as well as having concentrated positions.
- Equity: Equity compensation for an employee means getting partial ownership of the company. If equity is offered as part of your overall compensation, it could potentially be a valuable addition to your benefits package. This could also be helpful in your compensation negotiations, before or during employment, if you know it’s available at your potential employer. Typically, there’s a vesting period for the equity shares after which time you can sell them back to the employer or cash out. Note that if you gain income from the equity, it is taxable.
- Cash flow: If your salary or income and expenses, such as health care costs, have changed significantly with the switch to a private-sector job, managing your cash flow may need to change. Separate from a monthly budget, controlling cash flow helps with assigning your resources to specific priorities so you can reach your financial goals. This may involve investment management, tax planning, refinancing loans, or more. It’s key to building wealth as part of a solid financial plan.
Take action
As you close out one chapter in your career and begin a new one, it may be the right time to create or modify your financial plan. When transitioning careers, it’s important to have clear, long-term goals as your focus. Those can change over time, as will the path along the way, but having a target can help you make important financial decisions. Switching from federal government employment to private sector employment brings new and different options that should be navigated carefully to help ensure financial success.
Mercer Advisors has extensive experience in assisting clients who are going through major job or career transitions, including federal employees. Our seasoned team can collaborate with you to develop a financial plan that aligns with your professional objectives, so you can feel confident when taking the next step.
Are you ready to simplify and amplify your (financial) life? We can help by connecting the dots of your financial life by unifying financial planning, investment management, tax, estate, insurance, and more. We’d be honored to be part of your journey. Let’s talk.
1 “21 Crucial Career Change Statistics [2023]: How Often Do People Change Jobs?” Zippia, Feb. 9, 2023.
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