Following up on figures, CCC

A Reader Writes:

Milt, you are doing the math wrong! ["Retirement investments revisited"].

The fallacy is that with an annuity, there is no principal. If I put my $100 in a bank at 7 percent, at the end of the year I have $107 ($100 principal + $7 interest). If I put the same $100 into an annuity, at the end of a year I have $7. At 7 percent, it takes me 14 years just to get my $100 back. This is a giant rip-off.

Milt Replies:

Annuities pay annually until you die or — if you arranged it this way — until you and your spouse die. People buy annuities because they like the certainty of a monthly check and don't see themselves as astute investors.

In your example, if you annuitized your voluntary contribution fund at age 60 and live until age 90, you'd receive $240 during those 30 years (at $8 per $100) for every $100 in principal.

That is not a high rate of return, but some people like annuities because there are no investment decisions to make. Also, over the years, your contributions earn interest at a variable rate, tax deferred.

Different strokes for different folks, but I wouldn't call it a rip-off.

A Reader Writes:In a recent column [Ask Milt, March 14], you responded to a question that "I believe your retirement benefit high-three calculation considers your base pay, which reflects locality pay."

I'd re-check this one. Locality pay is not factored into your base pay. That is one reason feds object to the locality pay in publicizing pay raise average figures.

Milt Replies:

I've checked with Office of Personnel Management, and workers there tell me locality pay is included in retirement benefit calculation.

A Reader Writes:

This is not a question but an answer to the person who wrote about whether a person could count Civilian Conservation Corps (CCC) service as part of his or her civil service. [Ask Milt, Feb. 14].

In Chapter 1 of "Gold Medal CCC Company 1538: A Documentary," the enrollee cited with the longest service told me he had no break in his service between CCC and civil service. He went into civil service the very next day, and it counted toward his retirement as part of his career job.

As for accuracy, the enrollee who mentioned it thinks my book is fantastic. I had him review the part about himself before the book was published. — Kathy Mays Smith

Zall is a retired federal employee who since 1987 has written the Bureaucratus column for Federal Computer Week. He can be reached at


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