Feds Only: a 3.125% CD

Wednesday - 10/13/2010, 4:00am EDT

Looking for a super-safe government-backed certificate of deposit that pays 13 percent? No problem. Simply do this:

  • Invent or rent (my patent pending model is called Mike's Ultra-Superior WayBack Thingee) a time travel machine. Set the dial for 1987. Push button and wait.

Once you are back to 1987, and since you are a federal or postal workers, you can invest in Uncle Sam's Voluntary Contributions Program for as little as $25. And in 1987 the VCP was paying a sweet 13 percent. That dropped to 11.25 percent, but it is still better than anything you can invest in today.

If the time machine doesn't work out for you (mine still has a few rough spots) you can learn to live in the present. If you are still working and you are under the old Civil Service Retirement System (or CSRS Offset) you can still invest in the VCP program in addition to your automatic investments in the Thrift Savings Plan.

Unlike the TSP (which is funded with pre-tax money) investments in the VCP are made after taxes. That means that when you withdraw your money only the interest is taxable.

The Treasury Department sets the rate for the VCP each year. For 2010 that rate is 3.125 percent. If that doesn't seem like much consider how much your bank or credit union offers for its CDs. In fact the best CD in the country, offered by a bank in eastern Kentucky, is paying 1.76 percent, with a minimum deposit of $500. Other top Cds are in the 1.36 to 1.48 percent range, and they require a minimum deposit of $500 to $2,500.

The federal VCP takes deposits in increments of $25. And it's paying 3.125 percent for 2010.

Today at 10 a.m. on our Your Turn radio program, benefits expert Tammy Flanagan explains how the VCP works, who can join it and how it would work with a Roth option. And...

Best Day To Retire: As an added bonus, Tammy Flanagan---who invented the best-day-to-retire concept--- will discuss the best dates to retire this year, and for 2011. And why getting it right can be worth thousands of dollars to you.

If you have questions on the VCP or the Best Date To Retire you can email them to me: mcausey@federalnewsradio.com or, better yet, call in at 202-465-3080. The show starts at 10 a.m. EDT. You can listen live on your computer at www.federalnewsradio.com or, in the DC area, on the radio at WFED 1500AM.

Your TSP Portfolio

What a difference a year makes. After taking a real beating in August, the stock-indexed C, S and I funds of your Thrift Savings Plan roared back in September. Consider this:

On October 5, 2009 a share of the international-stock I fund was worth $17.65. That had risen to $19.07 as of last week.

The small cap S fund was worth $15.43 a year ago, and is up to$18.68 as of October 5, 2010. The large company C-fund was valued at $12.26 a year ago. It is now at $13.96. The popular treasury securities G-fund was at $13.02 last October and is now at $13.41.

To reach me: mcausey@federalnewsradio.com


Nearly Useless Factoid
by Vyomika Jairam

In an attempt to rebrand itself, clothing company the Gap introduced a new logo last week but the move was met with such vitriol from customers online that the company has abandoned its plans, and apologized to its customers for mishandling its attempts to "evolve."


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