Your high-3 is a crucial part in determining what your FERS pension is going to be in retirement.
This article will walk you through how you can calculate your high-3 to better understand and maximize your retirement.
If you want more information about how to calculate your pension, check out this guide.
What is Your FERS High-3 Salary?
Your high-3 salary is your average annual salary during your highest paid consecutive 36 months of your career. Your highest paid 3 years will often be your last 3 years but it doesn’t have to be.
FERS High-3 Salary Example
So if you were paid the most between 2019 and 2021 and your salaries were as follows:
2019: 95k
2020: 100k
2021: 105k
Then your high-3 salary will be 100k as that is the average of the 3.
However, your high-3 doesn’t have to be perfect calendar years (January-December).
For example, your high-3 could be from June 2018-June 2020.
What is Included In Your High-3
Unfortunately, not all types of pay will be included in your high-3.
These types of pay are included in your high-3:
-Your Base Salary
-Shift Rates
-Locality Pay
These types of pay are normally not included in your high-3
-Overtime Pay
-Overseas Cost of Living Adjustments
-Bonuses
-Cash Awards
-Travel Allowances
How to Maximize your High-3 Salary
There are 2 main ways to trying maximize your high-3
Hold high paying positions for at least 3 years
Move to a location/position with high locality pay for at least 3 years
Bonus Tip: Some federal employees move to an area with a very high cost of living during their last 3 years of their career in efforts to increase their pension for the rest of their lives. They then move in retirement to a low cost of living area.
How Working One Extra Year Affects Your High-3
How much of a difference working one extra year will make will depend on your specific situation and salary. But let’s do an example to give you an idea.
Let’s say high-3 years of pay are as follows:
2019: 95k
2020: 100k
2021: 105k
But if you were to work another year then your salary for that year would be 110k. How would that affect your high-3?
So now your highest 3 years are:
2020: 100k
2021: 105k
2022: 110k
So instead of a high-3 of 100k your high-3 is now 105k.
How Working One Extra Year Affects Your Pension
But after all, while a good high-3 is nice, what we are all after is a high pension.
So how does your high-3 affect your pension?
This article walks you through exactly how to calculate your pension and how your high-3 will impact your pension.
