Originally aired on KAOX, KID, KNRS, and KSL

FERS High-3 Salary Explained: How to Maximize the Foundation of Your Pension

Published: April 24, 2026 Author: Mike Stevens, Capital Wealth

For most federal employees, the high-3 is the single largest lever they can still pull before retirement. Your years of service are mostly locked in. Your multiplier depends on your retirement age. But your high-3 is still moving — every step increase, every promotion, every locality adjustment shifts the number that will drive your pension for the rest of your life.

Understanding how the high-3 works — and what you can still do about it — is one of the highest-value pieces of retirement planning any federal employee can do in the final few years of their career.

What Is the High-3?

The FERS "high-3" is the highest average basic pay you earned during any 36 consecutive months of creditable federal service. It is one of three variables in the FERS pension formula:

Annual Pension = High-3 × Years of Creditable Service × Multiplier

Because the high-3 is multiplied against every year of service — often 25 to 35 years — a small change in your high-3 produces an outsized change in your lifetime pension.

Rule of thumb: A $5,000 increase in your high-3 translates to roughly $50 per year of pension for every year of creditable service. Over 30 years of service and 25 years of retirement, that's more than $37,000 in lifetime additional pension income, before accounting for cost-of-living adjustments.

What Counts Toward Your High-3

The high-3 includes your basic pay, which means:

• Your GS base salary
• Locality pay
• Law enforcement availability pay (LEAP) for eligible LEO positions
• Administratively Uncontrollable Overtime (AUO) for certain positions
• Premium pay for standby duty, where applicable
• Night differential for wage grade employees

What Does NOT Count Toward Your High-3

These common pay elements are excluded from the high-3 calculation:

• Regular overtime
• Bonuses, awards, and cash incentives
• Travel reimbursements and per diem
• Holiday pay
• Sunday premium pay (for GS employees)
• Military leave pay

A common mistake: employees who earn significant overtime near retirement assume it's boosting their pension. It is not. Overtime increases your take-home pay during your working years, but the FERS formula ignores it.

How OPM Actually Picks Your 36 Months

This is the part most federal employees get wrong: OPM does not automatically use your final three years.

OPM examines every possible 36-month window in your career history and uses whichever one produces the highest average basic pay.

For most employees, this will still be the final three years — because federal salaries generally rise over time through step increases, within-grade increases, and locality adjustments. But there are common situations where an earlier period produces a higher high-3:

Common scenarios where an earlier period wins

You took a lower-graded position late in your career. For example, stepping down from GS-14 back to GS-13 two years before retirement. Your final three years will include time at the lower grade, pulling your average down.

You transferred from a higher-locality to a lower-locality area. Moving from San Francisco (44.15% locality pay in 2026) to a "Rest of US" locality (16.50%) late in your career can mean your pre-move years produce a better 36-month average.

You reduced hours to part-time near retirement. Part-time service reduces your basic pay proportionally, which can depress your final 36-month average.

In each of these cases, OPM will use the earlier higher-paid period automatically. You don't have to ask — but you do need to know this is happening so you can plan around it.

Strategies to Maximize Your High-3

1. Time your last promotion carefully

If you're expecting a promotion or grade increase within the last 3 years of your career, it will be included in your high-3 — but only for the portion of the 36-month window you hold that higher grade. A promotion two years before retirement captures 24 months of the higher salary in your high-3 window. A promotion six months before retirement captures only 6 months. If you can push your retirement date back to capture more months at the higher grade, it may be worth it.

2. Don't take a voluntary downgrade before retirement

One of the most expensive mistakes federal employees make is accepting a voluntary downgrade in the final years — usually to escape management responsibilities or a difficult supervisor. The short-term relief is real. But the pension impact can be $100,000 or more in lifetime income. Before accepting a downgrade within 3 years of retirement, run the numbers both ways.

3. Maximize within-grade step increases

Step increases happen automatically on a predictable schedule: steps 1-3 every year, steps 4-6 every two years, and steps 7-9 every three years. Retiring just before a step increase leaves money on the table. If you're within a few months of a step increase that would be fully captured in your high-3, it's usually worth staying.

4. Consider a "high-3 retirement date"

For employees who received a recent promotion, there's often an optimal retirement date 24 to 36 months after the promotion becomes effective — when the full higher salary is captured in the high-3 window. Retiring earlier captures less of the promotion; retiring later adds additional years of service but no further high-3 boost.

5. Account for the freeze-in effect of leave without pay

Extended periods of leave without pay (LWOP) do not increase your high-3 — your salary is effectively frozen during those periods. If you're considering LWOP close to retirement, understand that those months won't contribute to a higher pension.

Running Your Own High-3

You can estimate your high-3 using your last three SF-50 notifications plus any expected step increases or locality changes before retirement. For a more precise calculation — including how your high-3 interacts with your years of service, sick leave balance, and multiplier — use our FERS Retirement Calculator.

Enter your estimated high-3, and the calculator will show you exactly how each dollar of high-3 translates to annual and monthly pension income. It's the fastest way to see whether that promotion is worth staying for, or whether a downgrade would cost more than it's worth.

Getting It Right the First Time

Your high-3 is locked in the moment you retire. There is no going back, no recalculation, no redo. For most federal employees, the 2 to 5 years before retirement are the most consequential window of their entire federal career — every decision about grade, locality, hours, and timing ripples into the rest of their life.

Our federal benefits team has helped hundreds of FERS employees model their high-3 options, pick an optimal retirement date, and coordinate their pension with TSP withdrawals, Social Security timing, and FEHB continuation. If you're within a few years of retirement, schedule a federal retirement analysis to run your scenarios before you lock anything in.

For a broader view of federal retirement planning, see our FERS Retirement page and our FERS Retirement Planning Guide.