Unlike in the Thrift Savings Plan, those who retire with voluntary contributions accounts have to make a decision at retirement what they want to do with those accounts.
Voluntary contributions accounts are available only to those in the CSRS retirement system. The accounts allow CSRS employees to save up to 10 percent of their career earnings, with the interest shielded from taxes until withdrawn. Investments must be made with after-tax money, however.
Money can be withdrawn from a VC account in one of two ways: as a lump-sum or as an additional annuity. With a lump-sum withdrawal, the interest generally can be transferred into an individual retirement account.
While the TSP allows investors to defer a withdrawal decision until after age 70 1/2, VC account holders will want to act right away. The reason is simple: VC accounts stop earning interest upon retirement. Thus, while an account theoretically could be left in place after retirement, the money would no longer grow.
The VC option remains one of the least publicized and least understood of federal benefits. To begin participating, get form SF-2804 at www.opm.gov/forms.