The high-3 retirement calculation helps determine pension benefits for federal employees under the Federal Employees Retirement System (FERS) or Civil Service Retirement System (CSRS). 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 and 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 the high-3 is established, you multiply it by a percentage based on years of creditable service and a system-specific accrual rate to determine the annual annuity.

This annuity is a core part of federal retirement, paid monthly for life. Under FERS, the pension is typically combined with Social Security benefits and personal savings, such as a Thrift Savings Plan (TSP), to create 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, if a retiree chooses to provide a survivor benefit to a spouse, the reduction in their monthly annuity is calculated from the high-3 amount. Similarly, employees approved for disability retirement receive benefits based in part on what their high-3 would have been.

Because so many federal retirement benefits trace back to this one average, 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 for federal retirement, you’ll need to identify the three consecutive years—or 36 consecutive months—during which 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 October 2020 and September 2023, that period can be used. The pay from each year should be broken down by pay period, then totaled and divided by the number of months (36) to get the average.

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

Once the high-3 average is determined, it’s used in a formula to calculate the basic annual annuity payment for both FERS and CSRS employees. The formulas differ by system, but 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 are calculated using 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.

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, if 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), and 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, and 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.

However, if you are under age 62 at retirement or are not eligible for voluntary immediate retirement, 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

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.

Photo credit: ©iStock/JLco – Julia Amaral, ©iStock/Luke Chan, ©iStock/katleho Seisa