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Subject:  Re: Military Service Credit Date:  8/24/1999  2:12 PM
Author:  TMFPixy Number:  13417 of 103200

Greetings, Lwiller, and welcome. You wrote:

<<Currently my organization's benefits include a retirement plan and I contribute the maximum allowable annual contribution ($8,000) to my organization's Deferred Compensation Program. In addition, I am eligible to contribute and receive credit in the California Public Employees' Retirement System (CalPERS) for my Military service under the "public service" article of the Government Code. This election would add 3.290 years of service credit to my retirement account. The amount is about $22,000 and I can either (1) pay it in full, (2) pay it by payroll deductions over 8 years, or (3) pay a portion of it and pay the rest through payroll deductions. The payment schedule includes interest through the completion of payments at the rate of 6%. Would I be a Fool to sign up for this plan? Would it be Foolish to put a chunk of my savings into it as well. It seems this arrangement allows me to exceed the $8,000 annual cap. I can't get definitive answers from the plan administrator. >>

This is one of those occasions when I suggest you find a fee-only certified financial planner in your area familiar with the State retirement system. Have that individual run the analysis for you. The couple hundred is worth it compared to the buyback cost of the extra years and the potential increase in your lifetime stream of income at retirement. You won't know if the choice is Foolish or foolish unless someone who knows the plan provisions runs the numbers for you.

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