If you’re a FERS employee, your retirement annuity is primarily driven by two things: your years of creditable service and your High-3 average salary. Of those, the High-3 is often the most misunderstood.
It’s not your three highest-paid years.
Instead, your High-3 is the average of your highest 36 consecutive months of basic pay. For many federal employees, that ends up being their final three years of service—but not always. If you’ve taken a lower-grade position, changed roles, or had a break in service, your highest 36-month period could occur earlier in your career.
What counts as basic pay?
Basic pay includes your base salary plus locality pay. It does not include overtime, bonuses, awards, or other additional compensation. This is where many employees get tripped up—especially those who ramp up overtime in their final years expecting it to increase their pension.
Why this number carries so much weight
Your pension is calculated as a percentage of your High-3 average salary. That means even small differences in this number can have a lasting impact. A slightly lower High-3 could reduce your annual retirement income by hundreds of dollars—and that difference continues year after year.
Other factors that can affect your High-3
Certain situations can influence how your High-3 is determined. Periods of leave without pay (LWOP), part-time service, and breaks in federal employment can all affect which 36-month window is used and how it’s calculated.
What this means for your retirement planning
Your High-3 is one of the most important numbers in your retirement picture. Understanding how it’s calculated before you separate can help you avoid surprises and make more informed decisions about your timeline and income expectations.
If you’d like a clearer picture of your specific situation, consider speaking with a Federal Retirement Consultant (FRC®) for a complimentary benefits review.
