The Little Known VCP Account

January 14, 2020
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If you know a federal employee who has been with the government for a long time, you can share with them some little known information and call it a late Christmas gift! The VCP, Voluntary Contributions Program, is only available to federal employees who were hired under the old CSRS system, prior to 1987. Those who are eligible have a massive opportunity to save on taxes in retirement.


How it works

-A federal employee can contribute up to 10% of their entire work history base pay into the VCP account after tax. They can contribute for past years as well.

-The account earns a small amount of interest

-They have several options with the money, but one includes a withdrawal, which is eligible to convert to a Roth IRA. Currently there is no income limit on Roth conversions within the tax code.



Sally has worked for the government for 35 years and has averaged a salary of $100,000. Her lifetime earnings are $3,500,000. She is eligible to contribute $350,000 into the VCP account.

After making the contribution, she immediately converts the entire balance of $350,000 into a Roth IRA. Since the contributions were after tax, there are no taxes owed. She now has a $350,000 Roth IRA that grows tax free for the rest of her life.

Assuming she invested that for 30 years and earned 8%, she would have $1,271,234 morein the Roth IRA vs. a taxable brokerage account where she was taxed 20% per year on the growth of the account.


As with all investment decisions, they should evaluate their specific needs with a qualified tax and investment advisor before implementing. There are other options available within the VCP account other than Roth conversions that should be considered.


Disclaimer: Alex Voorhees and Reston Wealth Management do not provide legal, accounting or tax advice. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified investment, tax or legal advisor. The opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) or strategies may be appropriate for you, consult your financial advisor prior to investing. No strategy assures success or protects against loss. You should consider the investment objectives, risks, charges and expenses of any investment carefully before investing.