President Trump earlier this week announced a surprise plan to shrink the federal workforce by offering a buyout plan to government workers. And with a deadline of Feb. 6, those workers don't have long to decide what course they want to take.
The buyouts—really a "deferred resignation" agreement—have been offered to all full-time federal employees with the exception of military personnel, U.S. Postal Service employees, and immigration enforcement and national security workers. Those who accept would get about eight months of salary and benefits. To accept the offer, a message from the government's Office of Personnel Management has asked employees to respond with an email with the subject line "resign."
Financial advisors and other experts say anyone considering a buyout offer—whether in this instance or at a private sector company—should evaluate their long-term financial health before making a decision.
"The fact that you should reply to an email with the word 'resign' sounds like a phishing test," says Elizabeth Lotardo, a workplace and career expert. "We're not positive how or if this is going to play out."
Lotardo warns that the email offer has "some pretty vague terms," especially compared to a traditional buyout agreement. She advises government workers to "keep your cards close to your chest," and be mindful of what they are sharing with others and writing in Teams, in emails, and other work-related platforms.
"There is a significant possibility this buyout doesn't come to fruition in the way it's been planned, and the last thing you want to be left with is everyone around you knowing you've emotionally disconnected," she says. "At the very least, wait a few days to see what further clarification is provided."
That said, it is also not guaranteed that those who stay will get to keep their jobs, as the Trump administration has promised an overhaul. And those who stay could also see their jobs get much more challenging, Lotardo says. The current volume of work won't change, but it will be spread across fewer people.
At the same time, the buyout means thousands or potentially millions of more people entering the already challenging job market.
General buyout advice
In most situations, if you are offered a more standard buyout and are already looking to change careers or retire, then it can be a good option and "soft landing," says Jay Zigmont, certified financial planner at Childfree Wealth. But each offer needs to be evaluated on its own merits—watch out for strings attached.
"The current Fed buyout isn't really a buyout per se, but it is really more of an agreement to quit at a later date in return for not being forced to move," says Zigmont. "In corporate buyouts, watch out for non-compete and non-solicit clauses. Also, you will want to know if you are eligible for unemployment or other career services."
Steve Azoury, founder of Michigan-based Azoury Financial, advises those considering a deferred resignation to make an income plan, including detailing how much you can feasibly pull out, from where, and for how long it will last. If you have any high-interest debt, he says, it is unwise to leave your job before you pay it off.
Also, you'll want to make sure that the offer includes coverage for full pay and benefits for a period of time, not just pay, says Jake Falcon, founder and CEO of Kansas-based Falcon Wealth Advisors. And factor in pension or other retirement income.
"If your current job provides valuable health benefits that you might lose with the buyout, factor in the cost of obtaining similar coverage independently," says Falcon. "You will want to put a dollar and convenience amount to any benefits you may be walking away from."
Retirement income is an especially important consideration. In fact, Azoury suggests Gen Z and millennial workers think twice about any buyout, as the financial implications could compound and have negative consequences for the rest of your career.
"If you're young, you might want to keep working," says Azoury. "Accepting an offer of this kind when you're too young that forces you to pull money from retirement accounts may lead to unnecessary penalties."
Near retirees have special considerations
For older workers who may retire after leaving their positions, Azoury says to "de-risk" your portfolio. That means scaling back stock investments, which can help make your portfolio less volatile. That can give retirees, who have less time to make up for any potential losses if the stock market goes through a rough patch, more peace of mind.
Look to rebalance from stocks into bonds and cash, suggests Morningstar—a smart course of action for any pre-retiree or retiree. (Just know if you do, there could be tax implications.)
"This is important so your savings aren’t negatively affected by upcoming market swings," he says.
Unions warn buyout offer will cause 'chaos'
Multiple federal unions and organizations have come out with strong concerns about the necessity and legality of the call for voluntary resignations.
Noting that the number of civil servants hasn't "meaningfully changed" since 1970—the federal workforce is about 2% of the total workforce—Everett Kelley, president of the American Federation of Government Employees, urged workers not to take the offer.
"Purging the federal government of dedicated career federal employees will have vast, unintended consequences that will cause chaos for the Americans who depend on a functioning federal government," Kelley said in a statement. "This offer should not be viewed as voluntary."
The National Treasury Employees Union, the nation's largest independent federal employee union, also warned federal workers against taking the offer, saying the Trump administration memo lacks "clarity about the exact terms of the offer, making it unreliable."
The organizations say they are analyzing the offer, and encourage members to consider all of the consequences mass resignations of federal employees could have on the country.
"The so-called 'deal' is a hostile effort to disparage federal employees, weaken agencies and disrupt the valuable services that these employees provide to the public daily," NTEU National president Doreen Greenwald said in a statement.
Unions aren't the only ones who are urging workers not to do anything until more details and assurance are provided. Legal experts are also saying it is not clear whether Trump has the authority to even offer the deal, Fortune reported.
In fact, if the buyouts are challenged in court, it is possible those who take the deal now could lose out on the pay.
"If you agree to this deal you’re putting a lot of faith in an email," Alex Granovsky, an employment lawyer at firm Granovsky & Sundaresh who specializes in severance, told Fortune's Brit Morse. "That could be fine, but it’s like putting your faith in a handshake."
