Ask The Experts: Retirement

By Reg Jones

Annuity calculation

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Q. How many years of federal service does one have to work before retiring and receiving the exact amount of pay they are getting while working? Someone said you had to work until 35 years of service to receive your full retirement pay.

A. Regardless of which retirement system you are in, it would be impossible to retire and receive an annuity that equaled what you were earning as an employee. Under FERS, even if you worked for 50 years, your annuity would only equal 55 percent of your highest three years of average salary (.011 x your high-3 x 50). Under CSRS, you would receive the maximum earned annuity of 80 percent when you completed 41 years and 11 months of service. Of course, under both retirement systems, unused sick leave would be added and allow you to receive additional annuity. And if you were a CSRS employee who continued working after 41 years and 11 months of service, you could use your excess retirement contributions to purchase additional annuity, just as you could if you had participated in the Voluntary Contributions Program. However, it’s unlikely that they would get you close to the exact amount you were earning when you retired.

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Thrift Savings Plan payout

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Q. I have been contributing to the voluntary contributions program for many years. I understand that when I retire, I can move the interest earnings into my Thrift Savings Plan account and then the principal can be taken out as either a cash payment or an annuity. However, I was informed that the cash payment or annuity is an either/or option and that I can’t designate 50 percent for an annuity and 50 percent for a cash payment. Is this correct?

A. Yes.

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Voluntary Contributions Program

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Q. I will be retiring within the next 12 to 18 months and have just requested information on contribution to the Voluntary Contributions Program. I plan on making several large contributions before retirement. Can I continue to contribute after retirement, leaving the VCP intact and continuing to increase? Or do I have to take the annuity or the lump sum of the VCP at retirement? And does retirement end further contributions/participation in the VCP?

A. Your opportunity to contribute to and receive interest on a Voluntary Contributions Program account ends on the day you retire. At that point, you have the option of receiving a refund of your contributions, plus any accrued interest, or using the money to purchase additional annuity. For the full story on the VCP, go to


Excess payments

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Q. I am CSRS and made 41 years, 11 months in August 2011. I continue to have deductions for retirement taken out of my pay. As I understand it, the Office of Personnel Management will send me a lump sum for my excess payment after I retire. My options are to accept the refund or return the money to buy additional annuity.

1. Will the excess retirement dollars from September 2011 to Dec. 29, 2012 (date of retirement) equate to another 2 percent annuity?

2. Do I have the option of putting that money in a Voluntary Contributions Program account?

3. Can I take that refund and put it in my Individual Retirement Account, without taxes being withheld at the time of IRA deposit?

A. OPM will refund your excess retirement contributions, plus interest, and offer you the opportunity to buy additional annuity. The method used to determine the amount is the same one used in the Voluntary Contributions Program. As such, how much you can buy depends on your age and the amount of the refund. At age 55, each $100 would buy you $7 of additional annuity. The amount increases by 20 cents for each full year you are older than 55. So, for example, if you retired at age 62, every $100 would buy you $8.40 of additional annuity. Although it wouldn’t be increased by any cost-of-living adjustments applied to your regular annuity, you’d receive that increase for the rest of your life.

While you can’t roll the excess contributions into a VCP account, which would be pointless anyway because interest payments stop when an employee retires, you can roll over the non-interest portion of your refund into an IRA.

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VCP transfer into Vanguard Roth IRA

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Q. I will have 40 years with the Internal Revenue Service in 2012 and plan to retire either this year or in 2013. I have been contributing to both the Thrift Savings Plan and the Voluntary Contributions Program. I plan to leave the TSP contributions to the G Fund alone and let it grow.

The VCP is another matter. I have a Roth IRA with Vanguard and would like to transfer all of the VCP to the Vanguard Roth IRA.

I know I am required to pay tax on the interest the VCP has earned in the year received. How do I do this transfer? There seems to be a lot of information about the TSP, but I am finding it difficult to find information about the VCP.

A. To find out how to make the transfer, you can call the Office of Personnel Management at 888-828-9451 from 8 a.m. to 5 p.m. Eastern time. In the Washington, D.C., area, you can reach them at 202-606-0706. You may also contact them by email at, or write to:

U.S. Office of Personnel Management

Voluntary Contributions

1900 E Street, NW, Room 3H30

Washington, DC 20415

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Maxed out retirement

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Q. I will retire before I “max out,” but one part of your March 5 article intrigued me: You said that OPM would offer the retiree the opportunity to buy an additional annuity, similar to the Voluntary Contributions program.  Is that offered only to “maxed out’” retirees, or can any full- term retiree (I will have 35 years at retirement) do this? I will be 68 when I retire, so this program could be quite good for me. (I had a large VCP account, which I rolled over into a Roth IRA in 2010, when it appeared, wrongly, that the opportunity to do so would be limited to 2010.)

A. There are only two ways to do that. First, if a retiring employee has a voluntary contributions account, he can use that money to purchase additional annuity. Second, if he has over 41 years and 11 months of service, he will receive a refund of his excess contributions and can, if he wishes, purchase additional annuity with that

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Voluntary Contributions Program

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Q: My question is if one does not withdraw the Voluntary Contributions Program (VCP) upon retirement, what rate of interest will it earn? I have been told that if you do not withdraw the VCP, the so called basic interest of 7 percent is not the interest but rather the rate of repaying the principle. Thanks.

A: Interest only accrues to the date you leave government, retire, or transfer to a position not covered by CSRS of FERS, whichever is earlier. On the other hand, if you separate from the government with entitlement to a deferred annuity at age 62, interest will continue to accrue to the beginning date of your annuity or death, whichever is earlier. However, if you ask for a refund before receiving a deferred annuity, interest will only be paid to the date of your original separation.

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