Are You One of the Lucky 20%?

Looking for Uncle Sam’s savings sweet spot? It’s the place where a select few can invest almost unlimited amounts of cash. Where they get a government-guaranteed rate of return that puts CDs and other savings options offered by banks and credit unions to shame. This year, for example, the feds-only option paid 3.125 percent. And next year, whatever the rate, it will be higher than anything available outside of government.

Roughly 2 of every 10 current federal employees is eligible for the super-savings perk.

The investment option is similar to, but better than, any bank CD. It is called the Voluntary Contributions Program. And it is open only to current workers who are under the old Civil Service Retirement System or the CSRS Offset system.

Benefits expert Tammy Flanagan talked about it at great length last week on our Your Turn with Mike Causey radio show. She also gave you the best-date-to-retire. To listen to that show, click here.

In case you can’t or want even more detail, here’s a quickie tutorial.

The VCP has been around for decades but many government workers don’t know about it . Or they confuse it with the Thrift Savings Plan which is totally different and open to all feds.

The VCP works like this:

• To open an account you must still be working and be under the old Civil Service Retirement System or the CSRS Offset program. It is not available to retirees or to the majority of federal/postal workers who are under the newer FERS retirement plan.

  FERS employees however do get one break not available to CSRS types. Under the FERS system, workers are eligible for a 5 percent matching contribution to the TSP if they contribute at least 5 percent themselves. While some take it for granted, financial planners say it’s a major benefit that is equivalent to a 5 percent tax-deferred pay raise.

• Download SF 2804 (Application to make voluntary contributions.) Fill it out and send it to OPM.
• Once your account has been approved by OPM, you can begin making payments, via check, as frequently or infrequently as you like. Payments must be in increments of $25. And you can invest as much as you want or can, provided it does not exceed 10 percent of your lifetime federal salary.
• Once you are ready to retire, you have several options.

You can:
1. Withdraw the money in a lump sum. You will pay taxes only on interest earned, not on the amount you put in since that part’s already been taxed.
2. Have the VCP money applied to your annuity.
3. Use it as a vehicle to contribute to a traditional IRA or a Roth IRA. Although the limit on contributions is $5,000 to $6,000 a year, any amount of money in the VCP account can be transferred into a traditional or Roth IRA.

For more on how to get into the VCP, and how it works, checkout Tammy Flanagan’s most recent article on the subject from Government Executive titled Golden Opportunity.

Formal Retirement Planning

Do you really need help planning for retirement or is your HR department providing good advice. Today at 10 a.m. on For Your Benefit tax specialist Bob Leins and benefits counselor James Marshall will talk about how to maximize your TSP, lump sum annual leave payment, health insurance, survivor benefits and your likely pension. You can listen live at www.federalnewsradio.com or at WFED 1500 AM in the DC area.

To reach me: mcausey@federalnewsradio.com

Nearly Useless Factoid
by Suzanne Kubota

The BookofOdds notes the “state with the most impressive NFL player production is actually Louisiana. Though it has only 1 in 68.34 US residents, it produced 68 of the current NFL players (including Peyton and Eli Manning). That’s 1 in 24.94 players-by far the highest proportion in comparison to population.”

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