How Much Will My FERS Pension Actually Be?

Breaking Down the 3 Key Components

1. High-3 Average Salary

Your High-3 average salary is the highest average basic pay you earned during any 36 consecutive months of federal service.

• What IS Included: Base pay, locality pay, special pay adjustments, and night differential (for certain emergency/regular schedules).

• What IS NOT Included: Overtime pay, holiday pay, bonuses, awards, travel allowances, or lump-sum annual leave payouts.

Note: The 36 months do not have to be at the very end of your career, though for almost all federal workers, their final 3 years yield the highest earnings.

2. Years of Creditable Service

Creditable service includes your total full years and full months of civilian federal service. Days that do not add up to a full month (30 days) are dropped from the computation.

Boosting Your Creditable Service:

• Unused Sick Leave: Every 174 hours of unused sick leave adds 1 full month of creditable service to your retirement computation.

• Military Service Buyback: Active-duty military service post-1956 can be added to your creditable service if the military deposit is paid in full prior to your separation date.

3. The FERS Pension Multiplier

The multiplier used in your calculation depends on your age at retirement, total years of service, and job category:

Real-World FERS Pension Examples

Scenario A: Standard FERS Retiree

• Age at Retirement: 60

• Creditable Service: 25 years

• High-3 Average Salary: $100,000

• Multiplier: 1.0% (Under age 62)

Scenario B: The 1.1% Bonus Multiplier Retiree

• Age at Retirement: 62

• Creditable Service: 22 years

• High-3 Average Salary: $110,000

• Multiplier: 1.1% (Age 62+ with 20+ years of service)

The 1.1% Impact: Working until age 62 with 20+ years of service automatically boosts your lifetime pension payout by 10% for every year calculated.

From Gross Pension to Net Check: The 5 Mandatory Deductions

Your gross annuity is not what hits your bank account on the 1st of every month. Expect your gross pension check to be reduced by 20% to 35% due to mandatory and voluntary deductions:

1. Federal Income Taxes: FERS pensions are fully taxable as ordinary income at the federal level (minus a microscopic tax-free recovery of your own post-tax FERS contributions).

2. State Income Taxes: Taxability depends on your state of residence. Some states fully exempt federal pensions, while others tax them in full.

3. Survivor Benefit Plan (SBP): Electing full spousal protection reduces your gross pension by 10% (to give your spouse 50% of your unreduced pension). Partial SBP reduces your gross pension by 5% (for a 25% benefit).

4. FEHB Health Insurance: FEHB premiums continue into retirement, but they are paid with post-tax dollars in retirement (losing the active employee "premium conversion" tax advantage).

5. FEGLI Life Insurance: Premium deductions continue based on the coverage elections (Basic, Option A, B, C) and reduction choices made at retirement.