Your High-3 Is Not Your Last Three Salaries

Everything else in a federal annuity is a percentage. The high-3 average salary is the number those percentages are applied to, so an error in it is an error in every figure downstream — the annuity, the survivor benefit, and any calculation built on either. It is also the input people most often get wrong about themselves, because the phrase “high-3” suggests something simpler than the rule.

5 U.S.C. § 8401(3) defines it as the largest annual rate that results from averaging an employee’s basic pay over any three consecutive years of creditable service, with each rate weighted by the length of time it was held. Three separate things in that sentence differ from the common reading.

1. It is the highest three consecutive years, not the last three

Most careers rise, so for most people the highest window is the final one and the distinction never shows up. It shows up sharply for anyone whose pay fell at the end: a move to a lower-graded position, a step down from a supervisory role, a transfer from a high-locality area to a lower one, or the loss of a temporary promotion.

Take a career with these rates of basic pay, separating on 31 December 2026:

• January 2016: $92,000
• January 2018: $104,500
• January 2021: $118,300
• January 2024: $96,800 — a move to a lower-graded position

The last three years average $97,079. The highest three consecutive years run from January 2021 to January 2024 and average $118,300, because that entire window was spent at the one rate. The difference is $21,221 in the figure everything is multiplied by. On 25 years of service at the 1.1% factor, that is an annuity of $32,533 a year against $26,697 — $5,836 a year, for life, decided by which three years the rule happens to select.

The employee in that example does not have to do anything to get the larger figure. The rule finds the highest window on its own. What matters is knowing that it does, because someone who assumes their last three years govern will plan around a pension roughly 18% smaller than the one they have earned.

2. It is time-weighted, not an average of three annual salaries

The average is taken over the rates you held and the days you held them, not over three yearly figures. A raise in October contributes about a quarter of that year; the same raise in February contributes most of it. OPM does this arithmetic on a 360-day year of 30-day months, which is the same basis every other length of federal service is measured on.

The practical consequence is about the timing of a promotion rather than its size. A promotion that lands three years and one month before you separate is inside the window for its whole value. The same promotion landing two years and eleven months before you separate is inside it for less, and the window that includes it may not be the winning one at all.

3. It is basic pay only

Basic pay is your scheduled rate including locality pay. It does not include overtime, bonuses or awards, night or Sunday differentials, hazard pay, danger pay, allowances, or the value of any benefit. For most people the figure that belongs in a high-3 calculation is meaningfully lower than the total on their W-2, and the gap is not a rounding difference — a career with regular overtime can be off by a fifth.

Locality pay is the part worth double-checking, because it is included and it is also the part that moves when you relocate. A transfer from a high-locality area in the last years of a career can lower the final rate enough that an earlier window wins, which is the case in the example above.

What to do with this

Get your actual rate history rather than working from memory: every SF-50 records the rate and the date it took effect, and those two columns are the entire input. Then run the window, rather than the last three years, and use the result in any annuity estimate. If your pay has only ever risen, the two answers agree and you have lost nothing by checking.

One limit worth stating: a high-3 is computed from creditable service, so a period that is not creditable cannot be inside the window. If you have temporary service, refunded service, or military service that has not been paid for, settle what counts before deciding which three years are yours.

Sources

• 5 U.S.C. § 8401(3) — the FERS definition of average pay (§ 8331(4) for CSRS). Text of § 8401
• OPM CSRS/FERS Handbook, Chapter 50 § 50A2.1 — average salary computation: the three-year window, the 360-day year, and the weighting method. Chapter 50 (PDF)

The figures above are computed with lib/high-3.js and lib/fers-annuity.js, the same modules behind the calculators, so this page cannot disagree with the tools.

This guide is informational only. It is not financial, tax, or legal advice, and FedAnnuity is not affiliated with OPM or the U.S. government. Retirement rules turn on the specific facts of a career, and only your agency and OPM can give you a binding figure.

Last reviewed: August 2026 · Against 5 U.S.C. § 8401(3) and OPM Handbook Chapter 50 § 50A2.1.