# How to Calculate Your High-3 for Federal Retirement

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Federal workers receive a monthly income in retirement based on specific formulas. While these formulas vary depending on certain factors, income and service years are key components of their benefits. The basic calculation involves the three highest years of income under the Federal Employees Retirement System. Here’s how to calculate your high-3 for federal retirement and the factors that can affect your benefits.

## What Is the High-3 Average Salary?

The high-3 average salary is a baseline calculation that determines your federal retirement benefits. Typically, your highest income years are the last three years worked, but not necessarily. Depending on the roles taken throughout your career, your highest three income years may not be your final three years working.

## How to Calculate Your High-3 for Federal Retirement

Calculating your high-3 for federal retirement depends on whether you worked under the Federal Employees Retirement System (FERS) or if you spent time under other retirement programs.

Below, we break down the FERS basic annuity formula for participants who spent their entire career under FERS.

• Under age 62 at separation for retirement, OR age 62 or older with less than 20 years of service: 1% of your high-3 average salary for each year of service
• Age 62 or older at separation with 20 or more years of service: 1.1% of your high-3 average salary for each year of service

## Transferred to the FERS

If you transferred into the FERS after spending at least five years covered by the Civil Service Retirement System (CSRS) or Social Security, your annuity will have two components. Each of these components is calculated separately to determine your total benefit.

### Computation of the FERS component

• Under age 62 at separation for retirement, OR– age 62 or older with less than 20 years of service: 1: of your high-3 average salary for each year of service
• Age 62 or older at separation with 20 or more years of service: 1.1% of your high-3 average salary for each year of service

### Computation of the CSRS component

• First 5 years of CSRS service: 1.5% of your high-3 average salary for each year of service
• Second 5 years of CSRS service: 1.75% of your high-3 average salary for each year of service
• All years of CSRS service over 10: 2% of your high-3 average salary for each year of service

## Reductions in a Non-Disability Annuity

Here are four situations that may reduce your federal retirement non-disability benefits:

Age. Benefits may be reduced if you retire before the age of 62. However, benefits reductions do not occur if you complete at least 30 years of service, have 20 years of service and retire at age 60, or if you postpone the start date of your annuity.

Survivor benefits. When you pass away, your spouse receives a survivor benefit from your federal retirement annuity. Your monthly benefit is reduced to pay for the survivor benefit unless your spouse consents to your election of less than a full survivor annuity. Your annuity benefit is reduced by 10% if your spouse receives a 50% survivor benefit. If their benefit is 25% of your monthly benefit, your reduction is just 5%.

CSRS offset. The CSRS portion of your benefit is reduced by 10% of any deposit owed for non-deduction service performed before Oct. 1, 1982. If the deposit was paid before retirement, then there is no deduction.

Alternative annuity. You may elect to receive a lump-sum payment equal to your retirement contributions plus a reduced monthly annuity under certain conditions. This “alternative annuity” is only available for non-disability annuitants who have a life-threatening affliction or other critical medical condition.

## 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:

• Your annuity will be recomputed using an amount that essentially represents the annuity you would have received if you had continued working until the day before your 62nd birthday and then 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.

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

It is important to calculate your expected retirement income to determine if you are able to retire comfortably for your position. The high-3 for federal retirement is the three highest years of income during your federal career. Typically, your last three years worked are the highest-paid, but not necessarily. Your high-3 determines your baseline federal retirement annuity, but other factors can reduce your expected retirement income. Now that you know how to calculate your high-3 for federal retirement, you can better plan how to invest the rest of your money to meet your financial goals.

## 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 up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.