Key Takeaways
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Your High-3 salary is not just your base salary—it includes specific pay components and excludes others. Many government employees overlook this and end up with incorrect retirement projections.
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Estimating your High-3 using incorrect assumptions about pay periods, leave, or overtime can result in lower-than-expected annuity benefits.
Why Your High-3 Matters More Than You Realize
- Also Read: Divorce and Your Federal Pension—What Happens When You Split Assets and How It Could Affect Your TSP
- Also Read: What Happens to Your Federal Benefits After Divorce? Here’s the Lowdown
- Also Read: The Best FEHB Plans for 2025: Which One Fits Your Lifestyle and Budget the Best?
But here’s the problem: most employees think they understand what counts toward their High-3, and they’re usually wrong.
What Exactly Is the High-3 Average Salary?
The High-3 is the highest average basic pay you earned over any 3 consecutive years of service. It doesn’t have to be your last 3 years on the job—just the highest 3.
Basic pay includes:
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Your base salary
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Within-grade increases (also known as step increases)
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Special pay adjustments specific to your position or duty station (like law enforcement availability pay or premium pay for firefighters)
It does not include:
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Overtime
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Bonuses
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Awards
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Travel stipends
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Most differentials (like night pay or Sunday pay, unless specifically classified as basic)
Why Most People Get It Wrong
Here are some of the most common mistakes people make when estimating their High-3 salary:
1. Assuming It Automatically Equals Their Final Three Years
Just because you’re retiring in 2025 doesn’t mean your High-3 must be from 2022–2025. If you had a temporary promotion or special assignment years ago that paid more than your final position, that 3-year window could yield a higher average.
The key is the highest consecutive 36 months of basic pay in your career—not your most recent.
2. Including Overtime and Bonuses
Many employees incorrectly assume that their overtime hours, bonuses, or retention incentives contribute to their High-3. Unfortunately, they don’t.
This can be especially misleading for employees in high-demand positions who work long hours and earn extra income outside of their basic pay. That income might help your TSP contributions or personal savings, but it doesn’t raise your pension.
3. Overlooking Pay Gaps or LWOP
If you took extended leave without pay (LWOP), that could break up what would otherwise be a high-paying stretch. Gaps in service or periods of part-time work could also reduce the final average, even if you were in a high-grade position.
In 2025, HR systems are better at tracking pay periods, but any unpaid time still counts against your 36-month average.
4. Ignoring the Impact of Step Increases
Step increases (within-grade increases) can make a noticeable difference, especially in the General Schedule (GS) system. For instance, moving from Step 3 to Step 6 in a given GS grade can take your salary from mid-tier to top-tier within a few years.
Many employees miss out by assuming the salary listed for their current grade is what counts—but it’s the exact amount of basic pay, including the step, that matters.
How to Find Your Actual High-3
In 2025, most agencies provide detailed pay records through online HR portals. To find your High-3:
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Review your SF-50s: These show your pay grade and step, and any change in salary.
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Use your payroll statements: Look specifically for basic pay over time.
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Request a High-3 estimate: Your agency or retirement services office can provide a preliminary High-3 calculation.
Be cautious with rough estimates—a 1% error in your High-3 could translate into thousands of dollars over a 30-year retirement.
What About Locality Pay?
As of now in 2025, locality pay counts toward your basic pay for the purposes of the High-3 calculation. This is good news if you live in a high-cost area like San Francisco or Washington, D.C.
However, proposed legislation could eventually exclude locality pay from retirement calculations. While nothing has passed yet, it’s important to keep an eye on potential changes.
Why the Timing of Your Promotions Matters
If you received a promotion that bumped you into a higher GS level or pay band, the timing of that increase could impact whether it gets included in your High-3 window.
Let’s say you were promoted in January 2023. If you retire in January 2026, that full promotion period will count. But if you retire in June 2025, only 2.5 years of that higher pay might apply. The result? Your High-3 average could be lower than you expect.
You may want to align your retirement date with the anniversary of your promotion or step increase to maximize the impact on your High-3.
How Leave and Temporary Duty Affect Your High-3
Annual leave payouts, temporary assignments, and details often confuse employees. While these might result in a larger final paycheck or temporary pay boost, they usually don’t count toward basic pay unless the reassignment includes an official change in salary and duty station.
In 2025, temporary duty (TDY) allowances and per diems still don’t factor into High-3 calculations, even though they add to your take-home income.
If you’re detailed to a higher position, you must have a documented pay adjustment (not just a temporary acting role) for it to count.
High-3 Calculations Under FERS vs. CSRS
While both systems use the High-3 average, the formula for your annuity differs:
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FERS: 1% x High-3 x Years of Service (or 1.1% if retiring at age 62+ with 20+ years)
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CSRS: 1.5% x High-3 for the first 5 years, 1.75% for the next 5, and 2% for every year after that
This means your High-3 has even more weight under CSRS, where the multipliers increase over time.
In 2025, around 98% of current federal employees fall under FERS, but thousands of retirees still receive CSRS benefits, and your High-3 can drastically shift the outcome in either system.
Don’t Forget About TSP Contributions
While your Thrift Savings Plan (TSP) contributions are based on your full salary—including overtime and bonuses—your retirement annuity isn’t. That discrepancy can confuse people who assume both systems use the same pay base.
In 2025, the elective deferral limit is $23,500, and if you’re age 50+, you can contribute an extra $7,500. If you’re 60 to 63, you qualify for the super catch-up of $11,250. All of that can help supplement a lower-than-expected pension if your High-3 turns out smaller than you hoped.
Why You Should Double-Check Before Filing Retirement Papers
Before you retire, take time to:
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Review your highest earning periods
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Verify what pay counts toward your High-3
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Consult your agency’s retirement specialist
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Request a detailed annuity estimate based on verified pay history
Don’t assume the estimate on your most recent SF-3107 or other retirement forms is correct. Errors are common—and once your annuity is locked in, it’s hard to fix.
How to Strategically Plan Around Your High-3
A smart retirement strategy often involves increasing your basic pay during your final working years, ensuring the timing of promotions and step increases maximizes your 36-month window.
You may want to:
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Postpone retirement for 6–12 months to fully capture a recent raise
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Shift to a higher-paid position temporarily
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Leverage locality increases by moving to a higher-cost area with the same grade
In 2025, job flexibility has expanded across agencies, and strategic relocations or details can be used more effectively than ever before.
High-3 Accuracy Can Make or Break Your Retirement
Getting your High-3 wrong might not just be a minor misstep. It could impact your:
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Monthly annuity amount
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FEHB premium withholdings
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Survivor benefits
Your High-3 calculation becomes the permanent base for your annuity. The difference between a $92,000 vs. $96,000 High-3 can cost you tens of thousands over a 25- to 30-year retirement span.
Review Your Numbers Before It’s Too Late
Your High-3 salary deserves more than a guess. Review your pay history, confirm with your HR department, and align your retirement strategy with the reality of your earnings—not assumptions.
If you’re unsure how your High-3 lines up or want to project the long-term impact, speak with a licensed agent listed on this website for personalized, professional advice that reflects your actual career path and income history.
