How to Calculate Your High-3 for Federal Retirement

The high-3 retirement calculation helps determine pension benefits for federal employees. Both the Federal Employees Retirement System (FERS) and Civil Service Retirement System (CSRS) use this formula. The high-3 average reflects the average salary from the highest-paid 36 consecutive months. This period isn’t always the final three years of employment. This figure plays a key role in estimating retirement income for federal workers.

A financial advisor could help you create a financial plan for your retirement needs and goals.

What Is the High-3 for Federal Retirement?

The high-3 is the average of an employee’s highest-paid three consecutive years of basic pay. It serves as the starting point for calculating several key retirement benefits under the federal system. It applies to both FERS and CSRS employees, forming the salary base used in pension formulas. Once you establish your high-3, you multiply it by a percentage based on years of creditable service. This gives you a system-specific accrual rate to determine the annual annuity.

This annuity is a core part of federal retirement, paid monthly for life. FERS typically combines the pension with Social Security benefits and personal accounts like the Thrift Savings Plan (TSP). This creates a three-part retirement income structure. For CSRS employees, who generally are not covered by Social Security, the pension plays an even larger role.

In addition to the basic annuity, the high-3 also factors into benefits like survivor annuities and disability retirement. For example, suppose a retiree chooses to provide a survivor benefit to a spouse. Now the government calculates the reduction in their monthly annuity using the high-3 amount. Similarly, employees approved for disability retirement receive benefits based in part on what their high-3 would have been.

Because it affects so many federal retirement benefits the high-3 functions as more than just a technical calculation. It’s a figure that helps define the long-term financial outlook for many federal employees after they leave public service.

How to Calculate Your High-3 for Federal Retirement

To calculate your high-3 you’ll need to identify 36 consecutive months when you earned the highest average basic pay. Basic pay includes your base salary and some additional types of pay, such as locality adjustments. It does not include overtime, bonuses, or most allowances.

You don’t need to use calendar years, any span of 36 straight months counts. For example, if your highest earnings occurred between April 2023 and May 2026, you’d use that. You break down the earnings by pay period, then total them and divide by the number of months (36) to get the average. ¹

For FERS and CSRS employees alike, agencies may be able to provide a summary of federal service upon request or when retirement paperwork is initiated. You can estimate your high-3 in advance by reviewing past earnings statements, SF-50s, and payroll records. These help identify the highest-earning 36-month period. Accuracy depends on using actual pay data, not job titles or grade levels.

Calculating Your Pension Using High-3 Average

The government uses the high-3 average gets to calculate the basic annual annuity payment for both FERS and CSRS employees. The formulas differ by system. Both rely on multiplying the high-3 by a percentage that reflects years of creditable service and the applicable accrual rate.

Pension Formula for FERS Employees

FERS pensions use a flat percentage of your high-3 average multiplied by your years of creditable service. The basic annuity formula for participants who spent their entire career under FERS uses a multiplier of either 1% or 1.1%, depending on the employee’s age and tenure. ²

Employees who are under age 62 or have less than 20 years of service receive 1% of their high-3 average salary for each year of service. If you retire at age 62 or later with at least 20 years of service, the multiplier increases to 1.1%.

For example, say your high-3 is $90,000 and you retire at age 62. With 25 years of service, your annual pension would be $24,750 ($90,000 x 25 x 0.011). However, if you retired at age 60 with only 23 years of service? Your annual pension would be $20,700 ($90,000 x 23 x 0.01).

Pension Formula for CSRS Employees

CSRS uses a weighted formula that increases the accrual rate with years of service. The first five years are calculated at 1.5% of the high-3 average. The next five years at 1.75% and any remaining years at 2%. This tiered approach results in a higher effective percentage the longer someone stays in federal service.

For example, say you’re a CSRS employee with a high-3 average of $90,000 and 30 years of service. The first five years would be worth $6,750 (1.5% of $90,000). The next five years would add $7,875 (1.75% of $90,000). Finally,the remaining 20 years would contribute $36,000 (2% of $90,000). Combined, this results in an annual pension of $50,625.

CSRS employees also receive credit for unused sick leave. This adds to their total service time for both eligibility and pension calculations. Since most CSRS employees do not pay into Social Security, this pension typically represents their primary source of retirement income.

Disability Retirement Computation

For federal workers who are retiring due to a disability, the calculation may be different. If you are age 62 or older at retirement or meet the age and service requirements for immediate voluntary retirement, the FERS basic calculation above applies. If not, a new formula applies:

First 12 months: 

• 60% of your high-3 average salary minus 100% of your Social Security benefit for any month in which you are entitled to Social Security benefits. However, you are entitled to your “earned” annuity, if it is larger than this amount.

After 12 months:

• 40% of your high-3 average salary minus 60% of your Social Security benefit for any month in which you are entitled to Social Security disability benefits. However, you are entitled to your “earned” annuity, if it is larger than this amount.

When you reach age 62:

• When you turn 62, your annuity is recalculated. It’s based on the amount you would have received had you worked until the day before your 62nd birthday and retired under FERS.
• If your actual service plus the credit for time as a disability annuitant equals less than 20 years: 1% of your high-3 average salary for each year of service.
• If your actual service, plus the credit for time as a disability annuitant equals 20 or more years: 1.1% of your high-3 average salary for each year of service.
• Total Service used in the computation will be increased by the amount of time you have received a disability annuity.
• Average Salary used in the computation will be increased by all FERS cost-of-living increases paid during the time you received a disability annuity.

Cost-of-Living Adjustments

Federal retirement annuities receive annual cost-of-living adjustments (COLA) if one of the four following situations applies:

• Over the age of 62
• Retired under a specific provision for air traffic controllers, law enforcement or firefighters
• Retired on disability, unless it is based on 60% of your high-3 average salary
• Retirement income includes a portion computed under CSRS rules

How an Advisor Can Help Maximize High-3 and Federal Retirement Benefits

The high-3 calculation may seem like a straightforward math problem. However, the decisions that lead up to it, and the planning that follows, can be complex. Professional guidance can make a meaningful difference in what a federal employee actually receives in retirement.

An advisor can identify whether your highest-earning 36-month window has already occurred or not. Some federal employees assume the high-3 will automatically come from their final three years, but a period of reduced hours, a lateral move, or a change in locality pay could mean an earlier window produces a higher average. A financial advisor for federal employees can review your earnings history, SF-50s, and pay records. With these, they can identify the period that maximizes the calculation before you finalize retirement paperwork.

For FERS employees, the high-3 is only one piece of a three-part retirement structure. It also includes Social Security and the Thrift Savings Plan. An advisor can model how these three income sources interact. Your TSP withdrawal timing affects your tax bracket in the years with both Social Security and the pension. The combination of all three without a coordinated withdrawal strategy can push income into a higher bracket. The TSP’s Roth option adds another layer of planning that many federal employees underutilize, but an advisor would not.

The decision of whether to retire before or after age 62 with 20 or more years of service carries a specific financial consequence that is worth quantifying before making an irreversible choice. The difference between the 1% and 1.1% multiplier under FERS may appear small. However, when applied to a full career high-3 and paid out over decades, the cumulative gap is significant. An advisor can calculate the exact breakeven point between retiring earlier at the lower multiplier versus waiting to qualify for the higher one.

Long-Term Planning

Survivor benefit elections are another area where the financial implications are easy to underestimate. Choosing to provide a survivor annuity for a spouse reduces the monthly pension payment by a fixed percentage, but forgoing the benefit entirely leaves a surviving spouse without that income stream. An advisor can model the long-term cost of each option against alternatives such as life insurance and help couples make that decision based on actual projected outcomes rather than a default selection made at retirement processing.

For employees approaching disability retirement, the formula changes significantly depending on age and whether the standard or disability calculation produces a higher result. An advisor familiar with federal retirement rules can walk through how the 60% and 40% phases work, when the age-62 recalculation applies and how Social Security disability benefits interact with the federal annuity during each phase.

Finally, cost-of-living adjustments under FERS are not guaranteed until age 62 for most employees, which means early retirees face a period of fixed income in an inflationary environment. An advisor can help you build a plan that accounts for that gap, whether through TSP distributions, taxable savings or other income sources, so that the absence of COLA in the early retirement years does not erode purchasing power more than anticipated.

Bottom Line

The high-3 average reflects your highest-paid three years of service, which often—but not always—come at the end of your career. This figure determines your base annuity, though other factors may lower your actual retirement income.

Tips for Creating Retirement Income

• Meeting a retirement income goal is one of the biggest factors when people plan to quit working. For some people, their retirement pension from work is not enough to cover all of their expenses. Our retirement calculator helps you determine if you’ll have enough income based on how you spend money and what retirement income and assets you expect to have.
• A financial advisor helps investors create retirement income to meet their retirement goals. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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