Retirement investments revisited
- By Milt x_Zall
- Jan 09, 2003
A Reader Writes:
Please explain: How exactly do voluntary contributions affect your retirement?
Do they merely increase your tax-free return or do they increase your monthly
retirement? If you contribute $10,000, what impact does it have, or does
it roll over into a $10,000 annuity?
Milt Replies:
At retirement, each $100 in a voluntary contributions account (including
interest earned) will provide an additional annuity of $7 a year, plus 20
cents for each full year you are over age 55 at the time you retire.
You also may choose to share the additional annuity by electing to provide
a survivor annuity. However, your additional annuity would then be reduced
by 10 percent to 40 percent, depending on the difference between your age
and the age of the person designated to receive the survivor annuity. Any
person, related or unrelated to you, may be designated and need not be the
same person for whom regular survivor annuity benefits were elected.
If you will receive an additional annuity as a result of your voluntary
contributions, it will be taxed under the "General Rule." Please refer to
IRS Publication 721, "Tax Guide to U.S. Civil Service Benefits," for further information.
A Reader Writes:
Am I missing something here as it relates to voluntary retirement contributions
for Civil Service Retirement System people? Somehow getting an additional
$7 or so annually for each $100 additional contribution made doesn't seem
to be of any real value. Any thoughts?
Milt Replies:
That's better than 7 percent a year. Sounds pretty good to me!
A Reader Writes:
What is the duration, average maturity and yield for the Thrift Savings
Plan F Fund?
Milt Replies:
The F Fund yielded 7.36 percent for the 12-month period ending Nov.
30, 2002.
The TSP F Fund (Fixed Income Index Investment Fund) is a market-capitalization
weighted index of investment-grade, fixed-rate debt issues — including
government, corporate, asset-backed, and mortgage-backed securities — with
maturities of at least one year.
A mathematical model determines the amount in which this fund distributes
investors' money among the various types of U.S. government, mortgage-backed,
corporate and foreign government sector securities.
For more information on the F Fund, see the TSP Web site's page about
investment options for fixed-income funds.
Zall is a retired federal employee who since 1987 has written the Bureaucratus
column for Federal Computer Week. He can be reached at milt.zall@verizon.net.