Understanding your High-3

Your High-3 is the average of your three highest consecutive years of basic pay. It’s the salary figure at the center of your FERS pension. Since the formula multiplies it by your years of service and a small percentage (usually 1%), the High-3 sets the scale of everything else.

Averaging three years is a deliberate design choice, since it smooths out any single unusual year and stops anyone from spiking their pay right before retirement. OPM defines the High-3 as your highest average basic pay over any 3 consecutive years.

For most people, that average comes from the final three years, when salary is highest. It doesn’t have to be the last three, however, and an earlier stretch can win if your basic pay was higher then.

Because the pension scales directly with the High-3, raises near the end of your career carry extra weight. A promotion in your last few years raises both your paycheck and your pension for life. That’s a raise that keeps paying long after the paychecks stop.

Only basic pay counts toward your High-3. Basic pay is the salary your position pays, including locality pay, and it leaves out extras like overtime, bonuses, and awards.

The reliable test is simple: pay counts if retirement deductions are withheld from it. OPM includes salary increases with retirement deductions, such as shift rates. Your locality pay counts because deductions come out of it too.

The High-3 leaves out extra pay without retirement deductions. Overtime, bonuses, and cash awards don’t count, no matter how large, and neither do travel reimbursements or most allowances.

FERS picks the three consecutive years where your basic pay averaged the most. In a normal career, salary rises over time, so the highest block is your final three years. The formula averages those 36 months of basic pay.

A rising salary makes the math intuitive: each step increase and promotion pushes your recent pay above your earlier pay. By the time you retire, your last three years are almost always your highest.

With that said, there are exceptions. If you took a lower-paid position late in your career, an earlier three-year stretch might pay more. OPM uses whichever consecutive three years are highest, which protects you from a late pay cut.

The pension formula is your High-3 times a multiplier times your years of service. The multiplier is usually 1.0% per year, or 1.1% if you retire at 62 or later with at least 20 years. The High-3 is the dollar figure both of the others scale.

Picture an employee named Renee with an example $110,000 High-3 and 30 years of service. At the standard 1.0%, her pension is $110,000 times 1.0% times 30, or $33,000 a year. (Figures are illustrative; see our assumptions.)

Because the High-3 multiplies through, a higher final salary lifts the whole result. The same 30-year career on a $120,000 High-3 instead of $110,000 adds $3,000 a year to the pension, for life. That’s why end-of-career raises matter so much.

You can estimate your High-3 in a few minutes. Average your three highest consecutive years of basic pay, then run the result through the formula for a solid ballpark of your pension.

Start with your basic pay, not your gross pay (gross includes the overtime and awards that don’t count). Your leave-and-earnings statement and SF-50 forms show your salary rate. Use the basic-pay figure, which includes locality pay but excludes overtime, bonuses, and awards.

For most people, the last three years are the right window. Add those three annual salaries, divide by three, and you have your High-3. Then multiply by your multiplier and your years of service for an estimated annual pension.

Your High-3 is the one pension input you can still influence. Years of service accrue on their own, and the multiplier is fixed by law. Your final salary and the timing of your last raises, however, shape the High-3 directly.

Late-career moves have an outsized effect. A promotion, a within-grade step increase, or a move to a higher-locality area in your final three years all raise the average. Working a bit longer to lock in a higher salary block can lift the pension for life.

The High-3 also connects to the rest of your plan. It feeds the pension that anchors your three pillars, and it works alongside your eligibility date and the Special Retirement Supplement.

Estimating by hand gets you close; modeling gets you exact. To see your projected High-3, pension, and full retirement income, run your free readiness score. It pulls your numbers together for the retirement date you enter. To test how an extra year changes the result, use the What-If Scenarios tool on the Pro plan, which reprices the pension for any date you pick.