Displays signs to support federal workers and gather during protests. The US Capitol Building is located in the background of Capitol Hill, Washington, February 11, 2025.
Craig Hudson | Reuters
The sudden cuts to federal workers under President Donald Trump will likely throw a curveball into many American retirement plans, including typical underprivileged backgrounds like Black Americans.
The federal government is often seen as a stable employer with generous benefits, including defined benefits retirement packages that have become unusual in corporate America.
However, recent cuts like the extensive culling of employees with probation status have led some job seekers to rethink their career paths, and Janine Wiggins, owner of Neen, the Alabama job hunting coaching business, focuses on federal workers.
“Because of the massive layoffs and all the different executive orders on the go, they have a distrust of federal government work. There is a lot of volatility right now. … Previously, I’ve got a lot of clients who want to work for the government.
The complete impact of job cuts is determined. However, given the demographics of the federal workforce, it could affect certain minority groups at relatively high rates.
Black American workers accounted for just under 20% of federal workers in 2021, according to a survey by the US Government’s Office of Accountability. Other groups with relatively high representation in the federal workforce include Native Americans and people with disabilities.
One of the current employees is Katrina Ayers, the 36-year-old African-American mother of three from Mobile, Alabama, who works as National Guard engineers.
“What attracted me was of course work safety and health insurance. That was the biggest thing. It was stable,” Ayers said. She was a federal employee for nine years.
Ayers said she has private retirement savings, including a Ross IRA, in addition to her federal benefits. Still, she says she knows that some federal workers rely solely on government plans.
Federal Retirement Benefits
Most federal workers’ retirement packages consist of three main programs: Social Security, a savings plan like 401(k), and a pension program called the Basic Benefits plan. The minimum retirement age for pension plans is 57 years old for workers born after 1970. There are options for postponement or early retirement for workers who meet certain thresholds.
That base pension is calculated using years of service and the highest average salary during the third consecutive year of service, so even employees eligible for the program could potentially earn lower than expected benefits if pushed out. Employees who are separated from federal jobs before they are eligible to retire can receive a lump sum of their retirement contributions.
The 401(k) style savings savings plan is better than the average 401(k) plan seen in the private sector, said J. Mark Eury, currently a non-resident senior fellow at the Brookings facility and visiting scholar at Wharton School. He previously served as Senior Advisor to the Secretary of the Treasury from 2009 to 2017.
The defined benefit pension plans for many federal workers offer slightly lower levels of benefits than some of the comparable private sector plans still operating, Iwry said. However, federal programs have the rare perk that they are primarily adjusted for inflation.
Of course, the impact on retirement savings can also depend on how long it takes workers to find a new job, and whether they will need to settle some of their assets in the meantime.
“If you don’t have to change jobs, you may need to tap on retirement savings,” said Craig Copeland, director of Wealth Benefit Research at the Employee Benefits Institute.
Some low-income communities and families with low-wealth workers have more people to support, and some may put an even greater strain on their finances. This could be because there is evidence that black workers save less savings than their white counterparts at higher levels of income, Copeland said.
“Wealthy Black or Hispanic individuals felt they had a responsibility to care for other loved ones rather than saving for retirement.
Generally, the wealth gap between black and white savers is expanding due to a variety of factors, including black households with less exposure to the stock market, existing barriers to black homeownership, and underestimating homes in communities of color. This wealth gap continues to grow as people age.
What’s next?
The exact extent to which federal workers’ employment cuts is unknown. Several legal challenges have already been presented to the government efficiency of Elon Musk, which drives some job cuts. Tech Executive Musk took a similar cost-cutting approach when he bought the company previously known as Twitter.
The government has also done some backtracking, including the U.S. Food and Drug Administration, which rehired some of its staff in the medical device sector, suggesting that some of its roles that were decommissioned may need to be re-membered in the near future.
“People run the country, so you need to put people in and fire all these federal workers. I don’t understand the rhyme and why, because I feel it’s going to be a domino effect,” Ayers said.
On her part, Ayers said she needs to move to the private sector full time, but has a backup plan if she’s not ready to give up her career in the federal government yet.
“I still believe in career progression so I’m still going to apply for jobs. I’ve invested for many years and then I want to stay in the federal sector,” Ayers said.
