The basic formula for your federal pension

Federal pensions use a High-3 average salary multiplied by your years of service, multiplied by a percentage that depends on which retirement system you're under. The exact formula differs between the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS), which cover different groups of federal workers hired in different years.

For CSRS employees, the formula is: High-3 average × years of service × 1.5% to 2.0% per year. For FERS employees, it's: High-3 average × years of service × 1.0% per year for the first 20 years, then 1.1% per year after that. The percentage increases if you work past age 62 or past 20 years of service.

Your High-3 average is the highest average salary you earned over any consecutive 3-year period in your federal career. This is usually your final three years of work, but not always — if you took a pay cut near the end, an earlier three-year period might be higher.

Key Takeaways

  • Your federal pension is calculated by multiplying your High-3 average salary by your years of service by a percentage that ranges from 1.0% to 2.0% per year, depending on your retirement system.
  • CSRS employees (hired before 1984) generally receive a higher percentage per year of service than FERS employees (hired 1984 or later).
  • Your High-3 average is the highest average salary over any three consecutive years, usually your last three years but sometimes an earlier period if your pay decreased near retirement.
  • You can request a Personal Statement of Earnings from the Office of Personnel Management to verify the salary figures used in your calculation.
  • Survivor benefits and cost-of-living adjustments are calculated separately and may reduce your monthly payment if you elect certain survivor options.

Understanding High-3 average salary

The High-3 average is not simply your final year's salary. It is the average of your highest three consecutive years of pay, including base salary, locality pay, and some bonuses, but excluding overtime and certain one-time payments. The Office of Personnel Management (OPM) uses your Official Personnel Folder (OPF) and your Leave and Earnings Statement to calculate this figure.

If you worked part-time or had unpaid leave during your career, those periods still count toward your years of service but may lower your High-3 average because the calculation uses actual salary paid. If you received a significant raise in your final year, your High-3 will be higher than if you had retired the year before. Conversely, if you took a demotion or transferred to a lower-paying position near the end, an earlier three-year period might produce a higher average.

You can find your High-3 average on your Notification of Personnel Action (SF-50) forms or by requesting a Personal Statement of Earnings from OPM. This document shows your salary history and the three-year period OPM used for the calculation.

Differences between CSRS and FERS calculations

CSRS employees receive 1.5% of High-3 average per year of service for the first 5 years, then 1.75% per year for years 6 through 10, then 2.0% per year for years 11 and beyond. This means a CSRS employee with 30 years of service receives a much larger percentage of their High-3 than a FERS employee with the same tenure.

FERS employees receive 1.0% of High-3 average per year of service for the first 20 years. After 20 years, the rate increases to 1.1% per year. A FERS employee who retires at 20 years of service receives 20% of their High-3; a CSRS employee with 20 years receives 37.5% of their High-3. FERS employees are expected to supplement their pension with Social Security and their Thrift Savings Plan (TSP) contributions.

FERS also includes a Basic Benefit (the pension), an Annuity Supplement (a temporary payment until age 62 that approximates what Social Security will provide), and may be able to access to contribute to the TSP, a tax-deferred retirement savings account. CSRS employees do not receive an annuity supplement and do not pay Social Security taxes on their federal salary, so their pension is meant to be their primary retirement income.

How years of service are counted

Years of service include all time you were on the federal payroll in a position covered by CSRS or FERS. This includes full-time work, part-time work, and periods of paid leave. Military service before your federal employment may be creditable if you deposit the required amount to buy it back, though this is optional and costs money.

Periods of unpaid leave, suspension, or separation do not count toward years of service unless you were rehired and the break was less than three days. If you left federal service and returned years later, only your time after rehire counts, unless you were on military duty or certain other approved absences.

Your SF-50 form shows your Annuity Computation Date (ACD), which is the date OPM uses to calculate your years of service. This date is usually your hire date, but it may be different if you had a break in service or transferred between retirement systems.

Survivor benefit elections and their effect on your payment

When you retire, you choose whether to take your full pension as a single life annuity (payments stop when you die) or elect a survivor benefit option that reduces your monthly payment but continues payments to your spouse or children after your death. The Survivor Annuity Reduction is calculated by OPM based on your age, your spouse's age (if applicable), and actuarial tables.

If you elect the Survivor Annuity for Spouse and Children, your monthly payment is reduced by roughly 10% to 25%, depending on your ages. If you elect Survivor Annuity for Spouse Only, the reduction is smaller. These reductions are permanent and cannot be changed after you begin receiving your pension.

Some federal employees are required to elect a survivor benefit if they are married at retirement, depending on their retirement system and when they were hired. You receive a Notice of Proposed Withholding before retirement that explains your options and the exact reduction amount for each choice.

Cost-of-living adjustments and how they're applied

Federal pensions receive Cost-of-Living Adjustments (COLAs) each year, usually in January. The adjustment is based on the Consumer Price Index and is the same percentage for all federal retirees, regardless of when they retired. COLAs are applied to your base pension amount, not to any survivor reduction.

If you retire before age 62, your first COLA is delayed until the January after you turn 62. If you retire at age 62 or later, you receive your first COLA in the January following your retirement. COLAs are automatic and require no action on your part; OPM applies them directly to your monthly payment.

The COLA percentage varies year to year. In recent years it has ranged from less than 1% to over 8%, depending on inflation. You can find the current and historical COLA rates on the OPM website under "Retirement" and "Cost-of-Living Adjustments."

How to verify your calculation before you retire

Before you submit your retirement application, request a Personal Statement of Earnings from OPM. This document shows your salary history, your High-3 average, and your estimated years of service. You can request it online through your agency's human resources office or directly from OPM's website.

Review the document carefully for errors in salary amounts or gaps in service. If you spot a mistake, report it to your agency's human resources office immediately. Errors caught before retirement are easier to correct than errors discovered after your pension has begun.

You can also use OPM's Retirement Estimator tool (available on the OPM website) to calculate an estimate of your pension based on your High-3, years of service, and age. This tool does not give you your official calculation, but it shows you roughly what to expect and helps you catch obvious errors in the data you enter.

Frequently Asked Questions

What counts toward my High-3 average?

Your High-3 includes base salary, locality pay, and some bonuses and special pay. It does not include overtime, lump-sum leave payouts, or one-time payments. The exact items included depend on your pay system and your agency; your Leave and Earnings Statement shows what was counted.

Can I buy back military service to increase my pension?

Yes, if you served on active duty before your federal employment and did not already receive a military pension. You pay a deposit to OPM to buy back the service, and it is added to your years of service for pension calculation. The cost varies based on your military rank and length of service. Contact OPM or your agency's human resources office for the exact amount.

What happens to my pension if I die before I start receiving it?

If you die before your retirement date, your beneficiary may receive a refund of your contributions plus interest, or a survivor annuity if you were married and had elected survivor benefits. The rules depend on your retirement system and your marital status at the time of death. Your agency's human resources office can explain your beneficiary's options.

Does my federal pension get reduced if I work after I retire?

No, your federal pension is not reduced if you work for a private employer or another government agency after retirement. However, if you return to federal employment, your pension may be suspended while you are working, depending on your salary and retirement system. Contact OPM if you plan to return to federal work.

How do I know if my pension calculation is correct?

Compare your Personal Statement of Earnings to your own records of your salary and years of service. If the High-3 average and years of service match what you expect, the calculation is likely correct. If you find a discrepancy, contact your agency's human resources office or OPM's retirement services line to request a review.