FERS pension = High-3 salary × years of creditable service × 1.0% (or 1.1% if you retire at age 62 or older with 20 or more years of service). The formula produces an annual amount, divided by 12 for your monthly deposit. Example: $90,000 high-3 average × 30 years of service × 1.1% = $29,700 per year, or $2,475/month at retirement. A $80,000 high-3 × 25 years × 1.0% = $20,000/year ($1,667/month). FERS covers approximately 2.7 million federal civilian employees hired after 1983, and the annuity is one of three retirement system components — alongside TSP (the 401(k)-style account with agency matching) and Social Security.
What Is FERS and How Does the Annuity Work?
The Federal Employees Retirement System (FERS) is the primary retirement program for federal employees hired after 1983. It has three components:
- FERS Basic Annuity — the defined pension calculated by the formula above
- Thrift Savings Plan (TSP) — the 401(k)-style account with agency matching contributions
- Social Security — federal employees pay full Social Security taxes and earn full benefits
Most retirement planning for federal employees focuses on the annuity because it is the guaranteed income floor. TSP and Social Security add on top.
The FERS Annuity Formula
The formula has two versions depending on when you retire and how long you have worked:
Standard formula (under age 62, or 62+ with fewer than 20 years):
1.0% × High-3 Average Salary × Years of Creditable Service
Enhanced formula (age 62 or older with 20 or more years):
1.1% × High-3 Average Salary × Years of Creditable Service
The 0.1 percentage point difference sounds small. On a $90,000 high-3 with 30 years of service, it is the difference between $27,000 and $29,700 per year — $2,700 more annually, for life, paid monthly. That is why the 62+20 threshold is the most consequential planning milestone in FERS.
What Is the "High-3 Average Salary"?
Your high-3 is the average of your highest 36 consecutive months of basic pay. For most employees approaching retirement, that is the final three years — but it does not have to be.
What counts toward the high-3:
- Basic pay (your regular salary)
- Locality pay (included since 1994)
- Retained pay
What does NOT count:
- Overtime
- Bonuses
- Awards
- Allowances
- Night differential
The key rule: your high-3 is your highest 36 consecutive months of base pay, not necessarily your most recent 36 months. If you had a significant promotion, a geographic move, or a locality adjustment in the last few years, your high-3 is likely your most recent period. If your pay has been flat or you stepped into a lower-graded position, you may need to look back further to find the actual peak window.
How Does Locality Pay Affect the High-3?
Locality pay has been included in the high-3 calculation since 1994. If you worked in a high-locality area (Washington DC, San Francisco, New York, etc.) during your highest-36-month window, your high-3 will reflect that. The same formula applies regardless of locality — 1% × high-3 × years — but a higher locality rate produces a higher high-3, which produces a higher annuity.
What Counts as "Creditable Service"?
This is where most FERS estimates go wrong. Creditable service is not simply years on your leave and earnings statement.
Included in FERS creditable service:
- Years in a FERS-covered position
- Military service (if you paid the deposit to convert it)
- CSRS-covered time (if you transferred to FERS)
- Unused sick leave (converted at retirement — see below)
Not automatically included:
- Military service where you did NOT pay the deposit
- Temporary federal employment before age 18
- Periods of leave without pay (LWOP) exceeding 6 months in a calendar year
How Is Unused Sick Leave Converted to Creditable Service?
This is one of the most commonly overlooked components of the FERS calculation. OPM converts unused sick leave at a rate of 174 hours = 1 month of additional creditable service.
Worked example:
- 2,000 hours of unused sick leave ÷ 174 hours/month = 11.5 months of additional service credit
- At a high-3 of $100,000 with 30 years base service: 11.5 extra months at the 1.1% rate = $1,058 more per year ($88/month)
- 3,000 hours of sick leave (common for employees with decades of leave): 3,000 ÷ 174 = 17.2 months, or roughly 1.4 additional years of service credit
The formula: extra service months = sick_leave_hours ÷ 174. Multiply by your monthly annuity rate (high-3 × 1% ÷ 12) to estimate the annual increase.
Real Examples: FERS Annuity Estimates
| High-3 Salary | Years of Service | Multiplier | Annual FERS Annuity | Monthly Deposit |
|---|---|---|---|---|
| $75,000 | 20 years | 1.0% | $15,000 | $1,250 |
| $80,000 | 25 years | 1.0% | $20,000 | $1,667 |
| $90,000 | 25 years | 1.0% | $22,500 | $1,875 |
| $90,000 | 30 years | 1.0% | $27,000 | $2,250 |
| $90,000 | 30 years | 1.1% | $29,700 | $2,475 |
| $100,000 | 30 years | 1.1% | $33,000 | $2,750 |
| $110,000 | 33 years | 1.1% | $39,930 | $3,328 |
| $85,000 | 28 years | 1.0% | $23,800 | $1,983 |
Key rule: The 1.1% enhanced multiplier only applies when you are age 62 or older at retirement AND you have 20 or more years of creditable service. Retire at 60 with 28 years and you still use 1.0%.
These are gross annuity figures before deductions. Your actual deposit will be reduced by:
- Survivor benefit election (up to 10% reduction for full survivor benefit)
- FEHB premiums (if you continue health coverage in retirement)
- Federal income tax withholding
- State income tax (varies by state)
How Is the Monthly Annuity Derived from the Annual Amount?
The annual figure is simply divided by 12. There is no further actuarial reduction if you retire at your MRA with 30 years of service or at age 62 with 20+ years. The formula produces the unreduced annual annuity; divide by 12 for the monthly deposit. For example: $33,000/year ÷ 12 = $2,750/month.
The Minimum Retirement Age (MRA) Rules
You cannot collect FERS at any age. The minimum depends on your birth year:
| Birth Year | Minimum Retirement Age (MRA) |
|---|---|
| Before 1948 | 55 |
| 1948–1952 | 55–56 (graduated by year) |
| 1953–1964 | 56 |
| 1965–1969 | 56–57 (graduated by year) |
| 1970 or later | 57 |
Most federal employees active today were born in 1970 or later, giving them an MRA of 57. To retire at your MRA with an unreduced annuity, you need 30 years of service. With 10–29 years, you can retire at your MRA but your annuity is reduced 5% for each year under age 62 (this reduction is permanent). Alternatively, you can use the MRA+10 postponed option to take the reduction now and resume annuity payments at 62 with no further penalty.
The FERS Special Retirement Supplement
If you retire before age 62 under an immediate, unreduced annuity, you may qualify for the Special Retirement Supplement (SRS) — a payment that bridges the gap until Social Security begins at 62.
The SRS approximates what Social Security would pay for your federal years of service. It is calculated by OPM and is subject to an earnings test (reduced if you have earned income over the annual Social Security limit). The supplement stops at age 62 regardless of when you claim Social Security, is not indexed for inflation, and does not apply to FERS employees who took a reduced annuity or postponed their start date.
Get Your Actual FERS Estimate
The formula gives you a solid ballpark. For a precise number — including sick leave conversion, survivor benefit impact, FEHB costs, and TSP modeling — use the FERS Annuity Estimator →.
The estimator walks you through every input, flags common calculation errors, and shows your take-home annuity after deductions. Run your complete federal retirement scenario — FERS annuity, TSP withdrawals, Social Security, and year-by-year projections — with the Federal RetireStack tool →.
Frequently Asked Questions
What is the FERS retirement formula? FERS calculates your annuity as 1.0% × your high-3 average salary × years of creditable service. If you retire at age 62 or older with at least 20 years of service, the multiplier increases to 1.1%. The annual figure is divided by 12 to get your monthly deposit.
How is the high-3 salary calculated for FERS? Your high-3 is the average of your highest 36 consecutive months of base pay, including locality pay. It is not necessarily your most recent 36 months — it is whichever consecutive 36-month window produces the highest average. Overtime, bonuses, awards, and allowances do not count.
What is the age 62 and 20 year FERS rule? When you retire at age 62 or older with 20 or more years of creditable service, your annuity multiplier increases from 1.0% to 1.1% per year of service. This 10% increase in the multiplier applies for every year of creditable service, not just the years beyond 20.
How is the monthly annuity derived from the annual amount? The annual FERS annuity is simply divided by 12 to produce the monthly deposit. There is no additional reduction for the 62+20 unreduced annuity — the 1.1% multiplier already reflects the full benefit. Example: $33,000/year ÷ 12 = $2,750/month.
Does unused sick leave count toward FERS retirement? Yes. At retirement, unused sick leave is converted to additional creditable service at a rate of approximately 174 hours per month. An employee with 2,000 hours of sick leave gains roughly 11.5 months of additional service credit. At the 1.0% rate on a $100,000 high-3, this adds approximately $958/year to the annuity.
RetireStack provides retirement planning tools for federal employees. This article is for informational purposes only and does not constitute financial or benefits advice. Consult your agency HR office or a financial advisor for guidance specific to your situation.