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A CSRS Secret

If you are a CSRS employee, you may or may not know about the Voluntary Contribution Plan (VCP), an extremely powerful tool as part of your federal benefits. This plan, which is in addition to your TSP, allows you to contribute after-tax dollars regardless of your income level. There are really two factors about the VCP that make it such a great tool for retirement.

  1. Contribution Limit. You are able to contribute up to 10% of your total lifetime base pay (not including future contributions)! This can be done in regular smaller payments or even in one large payment. It allows any CSRS employee to bypass regular IRA contribution rules and make a large contribution all at once. And yes, the VCP does grow tax-deferred!

  2. IRA or a Roth Rollover. You have two options when deciding how to use the VCP – either purchase an additional annuity that is added onto your regular CSRS pension, or withdraw the entire account at one time and roll it into an IRA or Roth where future gains can be withdrawn tax-free.* This can be extremely beneficial if your income would normally disqualify you from making Roth contributions. Once the money has been rolled over, it has to follow normal Roth rules, but the VCP allows you to bypass a lot of contribution rules.

Here is the most important thing to know – you must begin the process of rolling over your funds PRIOR TO your actual retirement date. This is because the VCP account is only available while you are employed, and you must take steps to take advantage of this account. So be prepared before you retire!

Unfortunately, if you are a FERS employee, it is not available to you as part of your retirement benefits. But don’t let that stop you from taking advantage of your many benefits!

Don’t keep this a secret…tell your CSRS friends!

Call Marc at (215) 672-7676 to set up a complimentary meeting and answer your questions. 

 *Subject to Roth IRA rule