Calculate your FERS pension with our high-3 average salary calculator. Then estimate your annuity based on your high-3 salary, multiplier, and years of service.
Federal Retirement Computation for FERS Pension – Calculate Your High 3 Average Salary
This article serves as a guide to help federal employees grasp how their FERS pension is calculated, focusing on the two primary drivers: creditable service and the high-3 average salary.
Click here to use our FERS High 3 Calculator.
Introduction to FERS Pension Computation
To calculate a FERS annuity, whether it is an immediate retirement, postponed, or deferred, the basic equation is as follows:
Years of Creditable Service x the High Three x 1.0% (or 1.1% if immediately retiring at age 62 or older with at least 20 years of service)
But What Exactly is Considered Creditable Service?
Creditable service is the total time a federal employee has worked in a position covered by the Federal Employee Retirement System (FERS). As seen in the equation above: the years of service factor directly impacts the pension amount received upon retirement. Accumulating more creditable service through continuous federal service increases the overall pension amount, ensuring a more comfortable federal retirement.
Understanding the High 3 Average Salary for Federal Employees
The high-3 salary represents the highest average basic pay earned during any 36 consecutive months of federal service. This high-3 average salary factor in the FERS pension formula is multiplied by the years of service and an accrual rate (either 1.0 or 1.1 percent) to calculate the annual pension benefits a federal retiree will receive. The amount will the base for retirement income through your lifetime, but thanks to annual COLAs (cost-of-living adjustments) the amount of the monthly annuity will steadily increase over time.
Special Provisions for Specific Federal Retirement Calculations
Some occupations within the US government have special provisions under FERS, including enhanced accrual rates, enhancing their computation with a 1.7% multiplying factor for first 20 years of service. When calculating pensions for these roles, or for those with mixed service, specific formulas are used to accurately reflect the unique benefits they receive. Try the Special Provisions Federal Retirement Calculator if you have one of the following jobs for a federal agency:
What Counts as Creditable Service for FERS Annuity
Certain types of civilian service automatically qualify as creditable service under FERS. These services generally include:
- Federal service under a FERS appointment
- Prior CSRS service with no refund (Civil Service Retirement System)
- Service where full retirement deductions were taken
Service Types that Require a Deposit to Count Towards Pension
Some forms of civilian service, like temporary or intermittent service before 1989, and refunded CSRS service, could count toward your FERS pension, but only if a deposit is made to cover retirement contributions. Federal employees must carefully consider whether making this deposit is beneficial for their overall federal retirement plan and future benefits. Discussing your options with a fed-expert financial planner can help you make the best decision for your retirement goals.
Understanding Military Service Eligibility
Active-duty military service can be creditable under FERS if a military deposit is made. Guard and Reserve service have specific rules. If not, certain military service will not be counted. While you should make a military deposit as early as possible, making the deposit is not always the best route. For example, Military survivor benefits can be better than the FERS survivorship in some situations and depending on other variables, might be the deciding factor in not choosing to make a deposit for military time.
The Role of Sick Leave Credit in Pension Calculations for Federal Benefits
Under FERS, unused sick leave at the time of retirement converts to additional service time, increasing the total years of service used in the pension computation. While sick leave credit enhances the pension amount, it does not impact eligibility for retirement. Meaning if you have 29 years of service and have reached your MRA (minimum retirement age), a year’s worth of unused sick leave won’t give you an extra year for eligibility. However, if you have 30 years of service at your MRA with a year of service after converting your sick leave, you can use 31 years when calculating your annuity. (Years and months of unused sick leave can be used to get the 1.1 percent multiplier, though, if you retire at 62 or older with a length of service close to, but less than 20 years, and it’s enough to close the gap.)
Types of service that do not count towards FERS pension
It’s important to know what does not count as creditable service:
- Contractor time,
- Volunteer service,
- Military service without a deposit,
- Certain periods receiving Office of Workers’ Compensation Programs (OWCP) benefits are generally excluded from the FERS calculation.
How to Calculate Your FERS High 3 Average Salary
The high 3 salary represents the highest average basic pay a federal employee earned during any 36 consecutive months (3 consecutive years) of federal service. This high-3 the highest earnings during any continuous three-year period, playing a pivotal role in determining your FERS retirement annuity. Using a free federal retirement pension calculator can help to estimate the value of future income. The calculator is designed to play out different scenarios. Need a more in-depth look at the components used to calculate and plan you retirement? Get a benefits analysis report before submitting your application to OPM.
Pay Components included in the High-3 Calculation
Several pay components are included in the high-3 salary calculation. These generally encompass regular pay and locality pay, forming the foundation of the basic pay used in the FERS pension formula. These components contribute to the overall high-3 average salary, directly influencing the pension amount a federal employee receives upon retirement.
Common Mistakes When Estimating High Three
Common federal employee benefits mistakes in high-3 calculations include:
- Assuming overtime boosts the high-3,
- Forgetting that locality pay is included, along with the average basic pay you earned
- Overestimating the impact of bonuses,
- Mot recognizing wage-grade employees’ unique inclusions.
- Thinking the “high-3 salary“ is automatically the final three years of service of your federal career
Reach Out to Us!
If you have additional federal benefit questions, contact our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). We also hold the AIF® designation. At PlanWell, we are federal employee financial advisors with a focus on retirement planning. Learn more about our process designed for the career fed.
Preparing for federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars using our FERS webinar registration page. Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC℠ today. You can schedule a one-on-one meeting by visiting our contact page.
