Your High 3 Salary is an important part of your pension calculation for federal retirement. Your High 3 Salary is the highest average basic pay you earned during any 3 consecutive years of Federal service.
You should also know that your High 3 Salary is calculated based on three *consecutive* years, NOT calendar years. So your High-3 years might be April 2015 – April 2018.
Most people earn their highest pay during their last three years of service. But not always. Your High 3 years could be from an earlier time in your career. Make sure to review your entire earnings history.
Basic pay includes:
Basic pay does NOT include:
Where can you find info on your basic pay? Look on your Standard Form 50’s (SF50). Sometimes you can also find it on your Leave and Earning Statements (LES).
The first reason is pretty straight-forward. You need to know your High 3 Salary to estimate your federal pension. And you need to know what your federal pension will be so you can plan your retirement and make sure that you have enough money before retiring.
The second reason you need to know your High 3 Salary for federal retirement is because about 10-15% of federal retirement applications have an error in processing. And depending on which agency submits the application to OPM, the error rates can be much higher.
You need to have your ducks in a row and know your numbers so that when your retirement is processed, you’ll know whether or not you are receiving the correct amount.
Federal Employees in Non-Foreign Areas like Alaska, Hawaii and Puerto Rico, have been transitioned from receiving primarily COLA to primarily Locality Pay.
Locality Pay *is* considered when calculating your High 3 Salary, but COLA is not.
If you had time in an area with high Locality Pay, be especially sure to review your entire career before automatically assuming your High-3 are your last three years of service.
Click here to learn more about the change from COLA to Locality Pay.
Here are two methods you can use to calculate your High 3:
If you are 5+ years from retirement – you might not want to spend tons of time calculating your High 3 Salary.
If you’re just looking for a ballpark estimate, this is the fastest way to get a rough idea of your High 3.
Just take the three consecutive years where you received the highest pay (usually your last 3 years) and take your basic pay from the year in the middle.
Simple – sure, but it’s often pretty close to your actual High 3 Salary. And if you’re 5+ years from retirement, your High 3 will probably change by the time you’re ready to retire anyway.
If you are close to retirement, you’ll want a more specific calculation of your High 3.
Gather your SF50’s and get ready for some number crunching.
Since your pay probably increased at odd times during the year – you’ll need to account for those times when calculating your High 3 Salary.
Take a look at the example below…
In this example, this person’s High-3 time was from 9/1/2015 to 8/31/2018. Their basic pay increased several times during this period.
Let’s take a look…
*To get your “Time Factor” – you can use the Time Factor Table from Chapter 50 of OPM’s CSRS/FERS Handbook
Looking at the first row, we see that from 9/1/2015 to 1/4/2016, this person had a basic pay of $48,657.
Four months and three days represents the time between 9/1/2015 and 1/4/2016. Using the Time Factor Table, we find that 4 months and 3 days = 0.342 of a year.
Then we multiply their basic pay of $48,657 x 0.342 to get $16,641. This is the actual basic pay that was earned during this time period.
We complete a row every time they received an increase in basic pay.
Then we add the last column up to get the total amount of basic pay they received during their High 3. In this example, the number is $165,159. Then we take that number and divide by 3 to get their High 3 Salary of $55,053.
It can be a bit tedious. But, if you had several changes in your basic pay during your High 3 years, this method will help you calculate your High 3 pay to use in your Federal pension calculation.
Here is a blank table that you can print out and use to calculate your High Three Salary.
If your High-3 will be based on the last three years of service, start by subtracting 3 years from your planned retirement date.
If there was another time in your career that had higher pay, use those 3 years instead.
Federal retirement benefits are complex. While your HR can be a helpful resource – *you* are responsible for your retirement. And you need to make sure you understand your benefits *before* you retire.
“Hello Micah, I am so glad that I happened onto your website. I have read a lot of material and have watched a lot of podcasts. Because of your solid,
”I have gotten conflicting information about my lump sum annual leave. I plan on retiring on 12/31/21. I know that I will get my lump sum A/L payment a few
“How do I know when it’s worth it to withdraw (refund) my FERS contribution when I leave the Fed workforce? if I have less than 10 years but meet the
“First off, great content on your site! A plethora of information for Federal employees that is extremely invaluable for retirement planning. Regarding the FERS Supplement and VERA, does the supplement
Get the most out of your federal retirement benefits by taking advantage of the FERS resources created by Micah Shilanski, CFP®, and the team of independent financial advisors at Shilanski & Associates, Inc. Join the thousands of federal employees who trust us to guide them in their retirement planning journey because of our unique perspective of how your FERS benefits contribute to your comprehensive financial plan.
Year after year I see Federal Employees missing the same critical concepts in their federal retirement planning. That’s why I’ve created an online workshop to help educate Federal Employees on these critical concepts.
If you are a Financial Advisor looking to work with Federal Employees,
we are always looking for Advisors that want to deliver massive value to clients.
Advisory services offered through Shilanski & Associates, Inc., an Investment Adviser doing business as “Plan Your Federal Retirement”. Plan Your Federal Retirement is not employed by the United States Federal Government and does not represent the United States Federal Government. All content on this site if for information purposes only. This website is not personalized investment advice. Securities investing involves risks, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful. Please review our Customer Relationship Summary (Form ADV Part 3) for important information about our services and fees.
Opinions expressed herein are solely those of Shilanski & Associates, Incorporated, unless otherwise specifically cited. Material presented is believed to be from reliable sources, and no representations are made by our firm as to other parties, informational accuracy, or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant, or legal counsel prior to implementation.
Content provided herein is for informational purposes only and should not be used or construed as investment advice or recommendation regarding the purchase or sale of any security. There is no guarantee that any forward-looking statements or opinions provided will prove to be correct. Securities investing involves risk, including the potential loss of principle. There is no assurance that any investment plan or strategy will be successful.
7 CLASSIC RETIREMENT MISTAKES Federal Employees Make
Your privacy is our top priority, and we promise to keep your email safe! For more information, please see our privacy policy.
7 CLASSIC RETIREMENT MISTAKES Federal Employees Make
Your privacy is our top priority, and we promise to keep your email safe! For more information, please see our privacy policy.
One Response
Is there a print out I can get of my yearly wages while I was with the postal service? I have been separated since Jan 2016 and am now eligible to draw my pension but have no idea what my High 3 years are. Thank you.