How It's Calculated and Why It Matters

Your high-3 average salary is one of the most important numbers used to calculate your Federal Employees Retirement System (FERS) pension. Despite its name, it is not simply your highest-paid three calendar years. Instead, it is the highest average basic pay you earned during any consecutive 36-month period of federal service.

Understanding how the high-3 is calculated can help you estimate your future pension, evaluate retirement timing, and avoid common misconceptions.

Key Takeaways

The high-3 is the highest average rate of basic pay over any consecutive 36 months.
It is based on basic pay, not your total compensation.
Overtime, bonuses, awards, travel reimbursements, and most allowances are not included.
Annual pay raises that occur during the 36-month period are reflected in the calculation.
For most employees, the high-3 occurs during the final three years of federal service—but not always.

When federal employees begin planning for retirement, one of the first questions they ask is: “What is my high-3 average salary?”

The answer is important because your high-3 is one of the three primary factors used to determine your FERS basic annuity:

Your high-3 average salary
Your years and months of creditable service
The FERS pension multiplier

Even a modest increase in your high-3 can increase your lifetime retirement income.

What Is the FERS High-3 Average Salary?

The Office of Personnel Management (OPM) defines the high-3 average salary as the highest average basic pay you earned during any consecutive 36 months of federal service.

Many employees mistakenly believe the high-3 refers to their highest-paid three calendar years. In reality, OPM looks for the highest-paid 36 consecutive months, regardless of where they fall during your federal career.

For example, your high-3 period could be:

July 15, 2024 through July 14, 2027
October 1, 2023 through September 30, 2026

The dates do not have to align with the beginning or end of a calendar year.

What Counts as Basic Pay?

Only basic pay is included in your high-3 calculation. This is important because many forms of compensation that increase your paycheck are not considered retirement-covered pay.

Basic pay generally includes:

Base General Schedule (GS) salary
Locality pay
Special salary rates
Law Enforcement Availability Pay (LEAP), when retirement deductions are withheld
Administratively Uncontrollable Overtime (AUO), when retirement deductions apply
Other forms of premium pay specifically designated as basic pay for retirement purposes

Basic pay generally does not include:

Overtime pay
Cash awards
Performance bonuses
Recruitment or relocation incentives
Travel reimbursements
Per diem
Uniform allowances
Moving expenses
Most premium pay that is not subject to retirement deductions

As a result, your W-2 wages may be significantly higher than your official high-3 average salary.

How the High-3 Average Salary Is Calculated

OPM calculates your high-3 by identifying the consecutive 36-month period during which your average basic pay was the highest.

Suppose your annual basic pay was:

Your high-3 average would be:

($102,000 + $105,500 + $109,000) ÷ 3 = $105,500

In practice, OPM performs a more precise calculation because pay raises, promotions, and locality pay changes often occur during the middle of a year rather than on January 1.

Why Your High-3 Average Salary Matters

Your high-3 average salary is one of the three components used to calculate your FERS basic annuity.

For most employees, the formula is:

High-3 Average Salary × Years of Creditable Service × 1%

If you retire at age 62 or later with at least 20 years of creditable service, the multiplier generally increases to 1.1%, resulting in a larger pension.

Because the high-3 is multiplied by every year of service, even a relatively small increase can produce thousands of dollars in additional lifetime retirement income.

Example

Maria retires with:

High-3 average salary: $120,000
Creditable service: 30 years
Standard FERS multiplier: 1%

Her annual FERS pension would be: $120,000 × 30 × 1% = $36,000 per year

If Maria qualified for the enhanced 1.1% multiplier by retiring at age 62 or older with at least 20 years of service, her annual pension would increase to:

$120,000 × 30 × 1.1% = $39,600 per year

That’s an increase of $3,600 annually before taxes.

Does Your High-3 Have to Be Your Last Three Years?

No. Although the final three years of federal employment are often the highest-paid because of annual pay raises and promotions, that is not always the case.

Your highest-paid consecutive 36 months could occur earlier if you:

Accepted a lower-paying position before retirement
Moved from a higher locality pay area to a lower one
Left a position with a special salary rate
Experienced a reduction in pay for another reason

OPM automatically identifies the consecutive 36-month period that produces the highest average basic pay.

Common Misconceptions

“It’s my highest three calendar years.”

No. The high-3 is based on 36 consecutive months, not calendar years.

“It includes overtime.”

Generally, no. Most overtime pay is excluded because it is not considered basic pay for retirement purposes.

“My W-2 salary is my high-3.”

Not necessarily. Your W-2 includes many forms of compensation that are excluded from the high-3 calculation.

“Working one more year always increases my high-3.”

Not always. If your earlier 36-month period already represents your highest average salary, working another year may not significantly change your high-3. However, another year of creditable service can still increase your pension.

Tips for Federal Employees

If you’re approaching retirement, consider these best practices:

Review your SF-50s for accuracy.
Verify that promotions and pay adjustments are correctly documented.
Understand which types of pay count toward retirement.
Estimate your FERS pension before selecting a retirement date.
Remember that delaying retirement may increase both your years of service and your high-3 average salary.