Planning for retirement is difficult enough when you only have your own preferences and expenses to consider. But when outside factors unexpectedly impact your financial well-being, your ability to pay for even the most basic needs could be compromised. Federal government shutdowns are an excellent example of these outside factors at work.
When leadership in Washington, D.C., press pause because of budgetary disagreements, what does that mean for your finances? Is Social Security affected by a government shutdown? Find out the answers to those questions and see what you can do to maximize retirement income while minimizing the consequences of administrative hiccups.
A Brief Look at Government Shutdowns
A government shutdown happens when Congress fails to pass budget legislation for the upcoming fiscal year by the annual funding deadline. This includes 12 spending bills tied to appropriations committees covering everything from agriculture and rural development to homeland security and defense. Without that funding in place, federal agencies are forced to cease all non-essential operations until Congress passes the legislation and the president signs it into law.
Every federal agency determines its own shutdown procedure, including which activities will be suspended and which employees will be furloughed. Essential services, such as those pertaining to public safety, in-hospital care, and air traffic control, continue as normal. Other agencies, such as the Food and Drug Administration (FDA) and Environmental Protection Agency (EPA) run pared-down services, suspending inspections but continuing essential programs and emergency response efforts.
Government Shutdowns in Recent History
| Date of Shutdown* | Duration of Shutdown (in Days) |
| October 5, 1990-October 9, 1990 | 3 |
| November 13, 1995-November 19, 1995 | 5 |
| December 15, 1995-January 6, 1996 | 21 |
| October 1, 2013-October 16, 2013 | 16 |
| January 19, 2018-January 22, 2018 | 2 |
| December 21, 2018-January 25, 2019 | 34 |
*Source: History of Government Shutdowns
How Government Shutdowns Affect Social Security
Since Social Security is considered an essential program and most operations are tied to shorter-term appropriations bills, you can expect your main Social Security benefits to continue. But that doesn’t mean some aspects of the program won’t be affected.
Social Security Checks
The Social Security Administration (SSA) has a furlough plan that specifically provides for “accurate and timely payment of benefits.” Additionally, Social Security benefits come from a trust fund that’s run separately from annual appropriations. Therefore, government shutdowns shouldn’t suspend Social Security payments, including checks that go to retirees and those distributed to people with disabilities.
Social Security Applications
During a federal government shutdown, applications for Social Security disability and other Social Security benefits may still be processed. However, decreased staffing could lead to dramatically increased wait times.
Other SSA Services Affected
If the federal government shuts down, many federal employees will be furloughed or put on unpaid leave. This reduced workforce can leave gaps in services, making it more difficult—but not impossible—to have a determination hearing for SSDI eligibility or request a replacement Social Security card.
But with an estimated 8,103 SSA employees furloughed, you may not be able to:
- Verify benefits to help with a mortgage or loan application.
- Correct your earnings and/or benefit record.
- Get a replacement Medicare card (as Medicare enrollment is managed by the SSA).
- Submit a new application for Social Security disability benefits.
How Can Annuities Help Mitigate Income Uncertainty?
During the 2013 and 2019 government shutdowns, both Social Security benefits and applications were processed as usual. But that may not always be the case. In addition to concerns over possible government shutdowns, there’s also the likelihood that the SSA trust will run out of funding altogether. This could happen as soon as 2037.
Buying an annuity doesn’t replace your Social Security benefits. These self-funded retirement contracts act as a contingency plan, helping to give you more control over your financial future. By purchasing an annuity, you’re using your own money to establish a steady stream of income later in life. There’s no reliance on government coffers, and a shutdown would have little to no effect on annuity distributions. That’s because these contracts are offered and managed by private insurance companies, and your payment terms are set at the time of purchase.
Note: All guarantees are subject to the claims-paying ability of the insurer.
How Annuity Riders Help Customize Your Annuity
Annuities and annuity riders can help you create a retirement strategy that matches your needs without relying on government funding.***
Here are some examples of riders you may be able to add to your annuity contract:
- A COLA rider makes cost-of-living adjustments to your annuity distributions, helping to mitigate the impact of inflation.
- Long-term care riders allocate annuity funds for expenses tied to long-term care.
- Guaranteed minimum income benefit riders (GMIB) provide a guaranteed minimum income amount for the annuitant’s lifetime.
Note: Riders may be subject to eligibility and underwriting requirements, additional premium requirements and/or minimum or maximum coverage amounts. Availability and rider provisions may vary by state.
Government Benefits and Beyond: Planning for Retirement with Annuities
It’s important to understand your Social Security benefits and how separate plans and products, like an annuity, can help support you in retirement. You can’t control the government and Social Security may not always be on the table. But by having your own customized contingency plan, you can potentially enjoy greater security and less stress—even if Congress misses their deadline.
To learn more about annuities and how you can be more strategic about your retirement plan independent of government funding, reach out to a licensed agent today.
