What the 2025 Government Shutdown Means for Your Finances
- IIPS
- Oct 7
- 5 min read
The federal government shut down on October 1, 2025 after Congress failed to pass funding. You may be wondering how this will affect your personal finances. The good news is that most essential programs and services continue. Social Security, Medicare, and other mandatory benefits will still be paid on schedule[1][2]. For example, the Social Security Administration confirms that all current Social Security and SSI payments will go out on time with no change in payment dates[1]. Similarly, the Department of Veterans Affairs (VA) says 97% of VA employees remain at work and benefits like compensation, pension, and housing assistance will continue to be processed and delivered[3]. In short, most people relying on regular federal benefits need not worry about missing a payment during the shutdown.
Some services will slow or pause. “Essential” functions – things like national defense, air traffic control, law enforcement, and Medicare/Medicaid payments – continue uninterrupted[2][4]. But many “non-essential” activities halt. For instance, national parks and museums may close, and processing of new passport applications or visa requests could be delayed. Federal workers deemed nonessential are furloughed (sent home without pay) until Congress acts. If you are a federal employee or contractor, your paycheck will be delayed – but historic policy ensures back pay once the shutdown ends[5][2]. (Essential workers still get paid on time.) Even private-sector businesses may pause hiring or projects that depend on government permits.
How to Prepare and Protect Your Budget: It’s wise to take stock of your cash flow and savings now. Consider the following precautions in case any paychecks or services are delayed:
Build an emergency buffer. Add extra cash to savings or cut nonessential spending temporarily. A little extra cushion can cover any short-term hiccups. Federal workers, for example, might want to adjust budgets for one missed paycheck knowing it will arrive later with back pay[5].
Verify your direct deposit info. Ensure Social Security, pensions, or any benefit checks go to the right account. Set up online accounts (like SSA’s “my Social Security” portal) to track your benefits easily[1].
Continue essential investments. If you’re a long-term saver (retirement accounts, 529s, etc.), try to stay invested through the noise. Historically, shutdowns have caused only mild market blips[6][7]. In fact, markets often bounce back quickly once funding is restored.
Diversify income sources. If you rely heavily on any government-related job or contracts, think about backup income streams or skills. Even in a shutdown, private businesses (like national defense contractors) eventually recover with resumed funding.
Stay informed. Follow trusted news or your agency’s bulletins for service updates. For example, local SSA offices remain open but may offer limited services, so plan accordingly[8].
How the Markets Have Reacted in the Past
For investors, historical data offer some reassurance. LPL Financial notes that stock markets have typically shrugged off shutdowns[6]. In the 2013 shutdown (16 days long), the S&P 500 actually rose 3.1% during that period[6]. On average since 1976, shutdowns have coincided with roughly flat stock performance, and investors have been slightly more likely to see gains than losses[11]. In fact, since 1980 the worst S&P pullback during any shutdown was only about 2.2%[11]. Morningstar similarly describes shutdowns as “mini-crisis” events that trigger a short-lived “risk-off” mood[12]: volatility can tick up, stocks may dip a bit, and bond yields often fall as capital flows to safety[7]. But these effects have historically been small and usually reverse when normal funding resumes[7][11].
Likewise, Treasury bonds tend to be less affected or even briefly rally during shutdowns. Since shutdowns slow government borrowing only in the short run (debt auctions continue under contingency plans), yields on safe Treasuries have actually fallen slightly in past shutdowns[13]. For example, during recent shutdowns the 10-year U.S. Treasury yield dipped on average by about 0.05%[13]. This “flight to quality” means a conservative bond portfolio might see modest gains while stocks wobble a bit.
Overall, experts point out that shutdowns themselves have no track record of causing recessions[14]. First Trust economists note that in over 30 years of shutdowns (a total of ~80 days), none of those days fell in an actual recession[14]. When recessions did occur (like in 2020), they had other causes (e.g. the 2018-19 shutdown was followed by a recession over a year later only because of COVID-19)[14]. In short, a brief funding lapse by itself rarely upends the whole economy.
What You Should Do Now
Keep a long-term view. If you’re investing for retirement or education, remember that shutdowns tend to be short and markets often recover quickly[11][15]. Resist panic selling; instead, view any dip as a chance to buy quality assets at a slight discount.
Maintain diversified, high-quality portfolios. Stocks in certain sectors (defense, aerospace, pharmaceuticals) might see jitters if government contracts or approvals are delayed[9]. A broadly diversified portfolio helps cushion those sector swings. Also consider bolstering the “safe” side of your portfolio: cash and high-grade bonds now offer high yields (often 3–5% for Treasuries) compared to recent years. That can help offset any market turbulence.
Review your insurance and debts. Keep an eye on insurance payments or loan autopay to avoid unexpected lapses. Because financial markets are mostly stable through shutdowns, you can often remain in place with existing holdings and focus on paying down expensive debt or topping up reserves.
Plan for any personal delays. If you’re waiting on a government decision (like a permit, immigration case, loan application, etc.), expect delays. You might build extra time into those plans or consult a financial planner about contingencies.
Throughout this period, the key is calm and preparation. Shutdowns create headlines, but historically their impact on daily finances (aside from the temporary inconvenience for affected workers) has been limited. The necessary federal operations — funding your Social Security check, letting you board a plane, keeping the power grid running — are generally protected[2][4].
If you still feel uneasy, we’re here to help. Our team at IIPS can walk through your specific situation, review your budget and investments, and help adjust your plan if needed. We encourage you to contact us for a complimentary discussion if this shutdown raises concerns about your financial future. You can reach us at service@davidblountiips.com or call (407) 542-3249. Let’s ensure your financial strategy stays on track, no matter the headlines.
Sources: Government reports and financial research show that mandatory benefits payments continue during a shutdown[1][3]. Historical market data (LPL Financial, Morningstar, First Trust, etc.) indicate shutdowns have only minor, short-lived effects on stocks and bonds[6][7][14].
[2] Government Shutdowns Q&A: Everything You Should Know-Tue, 09/16/2025 - 12:00 | Committee for a Responsible Federal Budget
[3] What's affected by the government shutdown | The American Legion
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
Comments