With the stock market still wobbling around and bank interest rates low, those of you who are covered by the Civil Service Retirement System may want to consider putting some of you money into the government’s Voluntary Contributions program.

Year

G Fund VC

1999 5.99 5.75

2000 6.42 5.875

2001 5.39 6.375

2002 5.00 5.50

2003 4.11 5.00

2004 4.30 3.875

2005 4.49 4.375

2006 4.93 4.125

2007 4.87 4.875

2008 3.75 4.75

If you enroll in the VC program, you have a number of options about what to do with your money. You can leave it there as part of your estate, get a refund, roll it into an IRA, or purchase additional annuity when you retire.

If you retire at age 55 or earlier, you’ll get $

The additional annuity you buy will continue to be paid to you for the rest of your life (or your survivor’s, if you elected a survivor benefit). That’s the good news. The bad news is that VC annuities aren’t increased by cost-of-living adjustments (COLAs).

Based on past experience, I can tell you that there aren’t very many VC contributors who buy additional annuity with their money. Most of the time they use it as a place to invest excess income tax-deferred, but only after they have contributed the maximum amount to their TSP accounts.

If you want to contribute to the VC program but don’t want to buy any annuity, you can close out your account at any time and for any reason without penalty. However, if you do, you won’t be able to reopen it unless you leave the government and come back later on to a CSRS-covered position.

If you do close out your account, t

You can learn more about the Voluntary Contributions program by going to your personnel office and asking for a copy of OPM’s Retirement Facts 10: Voluntary Contributions Under the Civil Service Retirement System. Or you can download a copy at

 

axes will only be due on the accumulated interest. However, to postpone payment of those taxes to a later date, you can roll either the interest or the entire amount of your VC account into an IRA. 7 of additional annuity for every $100 in your account. For example, if you had $10,000 in your account, you could get $700 of additional annual annuity. For every year you were over age 55, the amount you could buy would increase by 20 cents. So, if you retired at age 60, each $100 in your account would buy $8 of additional annual annuity. If you wanted to, you could also purchase a survivor annuity for anybody you chose.

As a CSRS employee, the law allows you to contribute up to 10 percent of your total lifetime earnings while working for the government and earn interest on those deposits, compounded annually. Since 1985, VC accounts have been earning market rates that are generally comparable to what the TSP’s government securities G fund provides. Here’s what the returns look like for the last 10 years:

www.opm.gov/forms/pdfimage/RI83-10.pdf.