Retirement Planning Retirement PlanningRetirement Planning
Advice on how to prepare for life after government.

Retirement Estimate: The Details

As promised in my last column, this week we'll get into a little more detail about how your basic retirement benefit is calculated.

Even in this column, though, I won't be able to fill you in on every step in the process. But I'll try to provide an overview so that you're familiar with all of the terminology before you work with a human resources expert in your agency to come up with an accurate estimate of your future retirement benefits.

Let's dive right in.

Step One

The first step is computing your high-three average salary. The high-three is the largest annual rate resulting from averaging your rate of basic pay in effect over any period of three consecutive years of creditable civilian service, with each rate weighted by the length of time it was in effect.

Basic pay is the rate fixed by applicable law or regulation. It includes locality pay, but not cash awards, bonuses or overtime. Also, basic pay does not include annual cost of living allowances for employees in Alaska, Hawaii and Guam. But for law enforcement officers, availability pay is counted in the basic pay definition. (For a full definition of basic pay, see Chapter 30 of the CSRS and FERS Handbook.)

Your salary rates during the high-three period are weighted based on how many days each pay rate was in effect before it changed. For example, if you were to retire on May 31, 2007, your pay rate for this year would be in effect since Jan. 7 (the first day of the new leave year for most federal employees). So of your high-three years, a period of four months and 24 days would be at the 2007 pay rate. Of course, if you have received a pay increase since Jan. 7, this would have to be factored in as another pay rate during the high-three period.

Because of this method of computing the high-three, your retirement benefit will increase slightly every day that you continue working. This makes it difficult for some employees to commit to a specific retirement date. But you should also consider that as soon as you retire, you'll have that many more days, months and years to enjoy your retirement.

Step Two

Once you've determined your high three, you need to compute your total service. Prior to retirement, this is where you may have the most questions. If there are discrepancies in the history of your federal service or if there are missing records that document periods of service, this can cause problems and your retirement estimate may not be accurate. Only you know how much service you have and where you've worked during your federal career.

Your retirement benefit will be computed based on your creditable service. It is calculated by subtracting your service computation date from your retirement date. This is a tricky area. Sometimes the rules regarding service credit for retirement are different than the ones used to compute your service computation date for annual leave purposes. The service computation date on your leave and earnings statements and your Notification of Personnel Action statements is your "leave" date. Your retirement service computation date is figured when you retire or when you request a retirement estimate from your human resources office.

To better understand the service credit concept, you may wish to review a few of my previous articles on this topic: Getting Credit (Jan. 27, 2006), Buying Retirement Credit (Feb. 10, 2006), Redepositing CSRS Refunds (Feb. 17, 2006) and Military Service Payback (Feb. 24, 2006).

Also, for those of you under the Civil Service Retirement System, your unused sick leave is converted to extra service credit in the computation of your retirement benefit. Here's a previous article to help you understand this credit: Taking Your Sick Leave (Feb. 9, 2007).

Under CSRS, total creditable service is limited to 41 years, 11 months. For CSRS Law enforcement officers and firefighters, it's 35 years. Employees with additional service will be entitled to a refund of excess retirement contributions, with interest, at retirement. The maximum CSRS retirement benefit is limited to 80 percent of the high-three average salary. Sick leave credit allows the benefit to exceed 80 percent. Step Three

Your high-three average salary and length of service are used to compute your CSRS or Federal Employees Retirement System basic benefit. Once you've determined what they are, fill in the blanks on the appropriate worksheet below to determine your benefit.

CSRS Retirement Formula

Percentage x High-Three Average x Service Totals
1.5% x $ x 5 years = $
1.75% x $ x 5 years = $
2% x $ x Remaining years
and months
= $
Total all three answers in right column $

FERS Retirement Formula

1%* x Total years /
x $

= $
FERS basic

*Use 1.1% if age 62 or older with 20 or more years service

Remember, part-time service may affect these computations. See Part-Time Rules, Part One (March 2, 2007) and Part-Time Rules, Part Two (March 9, 2007). Also there are reductions -- such as those for unpaid service credit deposits or early retirement -- that may apply to your basic benefit, depending on your circumstances.

Retirement benefits are paid monthly. All of your withholdings for income tax and insurance will be monthly amounts.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.


Tammy Flanagan has spent 30 years helping federal employees take charge of their retirement by understanding their benefits. She runs her own consulting business at and provides individual counseling as well as online training for the National Active and Retired Federal Employees Association, Plan Your Federal Retirement as well as the Federal Long Term Care insurance Program. She also serves as the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Federal News Radio on Mondays at 10 a.m. ET on WFED AM 1500 in the Washington-metro area. Archived shows are available on

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