How to Calculate Your Government Pension: FERS, CSRS, and COLAs

To calculate your federal pension, multiply your high-3 average salary by your years of creditable service and by a percentage set by your retirement system. Under the Federal Employees Retirement System (FERS), that percentage is 1% (or 1.1% if you retire at 62 with 20 or more years). Under the older Civil Service Retirement System (CSRS), the percentage climbs in tiers as your service grows. A 30-year FERS employee with a $100,000 high-3 receives about $30,000 a year; the same career under CSRS pays roughly $56,250. The formula is simple. Getting the inputs right is where careers-worth of dollars are won or lost.

Figure Out Which System You’re In

CSRS covers federal employees first hired before January 1, 1984, who never had a break in service long enough to convert them. FERS covers most employees hired on or after that date.¹² Your SF-50 (Notification of Personnel Action) carries a retirement code that tells you which one applies. Check that before you run any numbers, because the formulas are not interchangeable.

You also need to be eligible for an immediate annuity for the standard formula to apply as written. Under FERS, that means age 62 with 5 years of service, age 60 with 20, or your Minimum Retirement Age (MRA) with 30. MRA is 56 for those born between 1953 and 1964 and rises to 57 for anyone born in 1970 or later.³ CSRS eligibility is similar: 62 with 5 years, 60 with 20, or 55 with 30.⁴ There is a reduced FERS option at MRA with 10 years of service; more on the penalty for that below.

Find Your High-3 Average Salary

Both systems build the pension on the same salary input: your “high-3,” the highest average basic pay you earned during any three consecutive years of federal service.⁵ Any 36-month window works. It doesn’t have to be calendar or fiscal years. For most people the final three years pay best, but the formula picks whichever stretch produces the highest average.

Basic pay includes your General Schedule (or equivalent) salary and locality pay, plus certain additions from which retirement deductions are withheld, like shift differentials.⁶ It does not include overtime, bonuses, or most special allowances.⁷ That surprises people whose paychecks lean heavily on overtime. None of that extra income counts.

When your salary changed mid-year, weight each rate by the days it was in effect. Say you earned $85,000 for four months and $90,000 for the next eight. Compute each segment, add them, and that’s the year’s contribution to the 36-month total. Add all 36 months together, divide by three, and you have your high-3.

Add Up Your Creditable Service

Creditable service is tracked in years, months, and days. For the formula, convert it to a decimal. Twenty years and six months becomes 20.5. Every partial month matters because it’s being multiplied against a percentage of your salary for the rest of your life.

Sick Leave

Unused sick leave gets converted to service credit at retirement using a 2,087-hour work year, so 2,087 hours equals a full year.⁸ A few hundred hours still translates to real months. One limit: sick leave can raise your annuity, but it cannot be used to meet the minimum service requirement for eligibility.

Military Buyback

Military time served before your civilian federal career can often be counted toward your pension if you make a deposit. You file DD-214 documentation and an estimated earnings request through the Defense Finance and Accounting Service.⁹ Apply within three years of starting civilian federal service and no interest is charged. Wait longer and interest accrues. The deposit must be paid before you retire.

Extended periods of leave without pay cut into creditable service, so document each one to keep your final service computation clean.

Run the FERS Formula

FERS uses one clean formula for most retirees:

1% × High-3 Average Salary × Years of Creditable Service

A 25-year employee with a $95,000 high-3 gets $23,750 a year, or roughly $1,979 a month before deductions.⁵

Retire at 62 or later with at least 20 years of service and the multiplier bumps to 1.1%.¹⁰ That same 25-year, $95,000 employee now gets $26,125 a year instead of $23,750. An extra $2,375 every year for the rest of your life is the financial argument for staying until 62 if you’re close.

The MRA+10 Penalty

Retire at your MRA with at least 10 but fewer than 30 years and you can start collecting immediately, but the annuity is permanently reduced by 5% for each year you are under 62.³ A 57-year-old walks into a 25% permanent cut. You can dodge the reduction by postponing the annuity’s start date until 62, but you go without pension income in the meantime.

Run the CSRS Formula

CSRS is tiered. Each block of service earns a higher percentage than the last:

First 5 years: 1.5% of high-3 per year
Years 5 through 10: 1.75% per year
Every year beyond 10: 2% per year

For a CSRS employee with 30 years of service and a $100,000 high-3:

First 5 years: 1.5% × $100,000 × 5 = $7,500
Next 5 years: 1.75% × $100,000 × 5 = $8,750
Remaining 20 years: 2% × $100,000 × 20 = $40,000

Total: $56,250 a year, or 56.25% of the high-3. The same career under FERS pays $30,000. CSRS employees generally don’t participate in Social Security through their federal service and contributed more from each paycheck during their careers, which is why the replacement rate is so much higher.

CSRS pensions are capped at 80% of your high-3.¹¹ Under the tiered rates, you hit the ceiling at about 41 years and 11 months. Sick leave credit and cost-of-living adjustments don’t count against the cap, so long careers with big sick leave balances still benefit from those additions.⁷

Account for the FERS Special Retirement Supplement

If you retire under FERS before 62, you may qualify for a temporary extra payment that bridges the gap until Social Security. You need to be leaving at your MRA with 30+ years, or at 60 with 20+ years. Certain special-category employees like law enforcement officers and firefighters qualify under their own rules.¹² MRA+10 retirees do not get the supplement.

OPM approximates your Social Security benefit at 62 for FERS-covered service, then multiplies it by your years of FERS service divided by 40.¹² Thirty years of FERS service and an estimated $2,000 monthly Social Security benefit at 62 works out to roughly $1,500 a month (30/40 × $2,000). Sick leave credit and military buyback time do not count toward the service years in this fraction.

The supplement stops the month you turn 62 whether you’ve filed for Social Security or not. There’s also an earnings test: earn more than $24,480 in 2026 and the supplement is reduced by $1 for every $2 above the limit.¹³ The reduction only affects the supplement, not your basic FERS annuity. Even moderate part-time work can zero it out.

Know How COLAs Will Change the Number

Your pension gets annual cost-of-living adjustments once you’re retired, but the two systems treat them differently. CSRS retirees receive the full adjustment based on the year-over-year change in the Consumer Price Index for Urban Wage Earners (CPI-W).¹⁴

FERS retirees get a diet version. If the CPI-W increase is 2% or less, the FERS COLA matches it. Between 2% and 3%, the COLA is capped at 2%. Above 3%, the COLA is 1 percentage point less than the CPI-W change.¹⁴ The 2026 FERS COLA is 2.0%.

One detail that catches early FERS retirees off guard: you generally don’t receive COLAs until you turn 62 unless you retired on disability or receive a survivor annuity. Retire at 57 with 30 years, and your pension sits flat for five years while prices keep moving.

Subtract What Comes Out of the Check

The formula gives you a gross annual figure. What lands in your account is smaller, sometimes by a lot.

Survivor Election

If you’re married, you’ll be asked whether to provide a survivor annuity. Under FERS, the maximum election reduces your pension by 10% and pays your spouse 50% of your unreduced annuity after your death. A partial election cuts your pension by 5% and provides 25%.¹⁵ Declining any survivor benefit requires your spouse’s written consent. The 10% feels steep now; a surviving spouse without other pension income may need every dollar of that 50%.

Health and Life Insurance

Federal Employees Health Benefits (FEHB) premiums come straight out of your annuity if you keep coverage. The government contribution continues at the active-employee rate, covering about 72% of the weighted average premium.¹⁶ For 2026, monthly Self Only premiums average about $977, with the government paying up to $703.65 of that.¹⁷ Self Plus One and Self and Family cost more. Federal Employees Group Life Insurance (FEGLI) can also continue; Basic coverage runs about $0.35 per month per $1,000 of coverage regardless of age.¹⁸

Federal Income Tax

Most of your pension is taxable, but the portion representing a return of your own after-tax contributions is tax-free. For annuities starting after November 18, 1996, the tax-free portion is calculated using the IRS Simplified Method, which divides your contributions by a number of months tied to your age at retirement.¹⁹ That monthly tax-free amount stays fixed even as COLAs raise the gross payment. CSRS retirees usually have a larger tax-free portion because they contributed more during their careers. State treatment varies widely: some states fully exempt federal pensions, some tax them as ordinary income, and many sit between the two.

A Complete Example

Take a FERS employee retiring at 62 with 28 years of service, 1,044 hours of unused sick leave, and a $105,000 high-3:

Sick leave conversion: 1,044 ÷ 2,087 = about 6 months of extra service credit
Total creditable service: 28.5 years
Multiplier: 1.1% (age 62 with 20+ years)
Annual gross annuity: $105,000 × 1.1% × 28.5 = $32,917.50
Monthly gross annuity: about $2,743

From that $2,743, subtract a survivor election (10% for the full benefit), FEHB premiums, FEGLI if kept, and federal tax withholding. The net check often lands somewhere around $2,100 to $2,300, depending on your choices. The FERS pension is one leg of a three-leg stool alongside Social Security and Thrift Savings Plan withdrawals. A CSRS pension typically replaces a much larger share of pre-retirement income on its own, because Social Security generally isn’t part of the equation for your federal service years.

1
Office of the Law Revision Counsel. 5 USC Ch. 83 – Retirement
2
Office of the Law Revision Counsel. 5 USC Chapter 84 – Federal Employees Retirement System
3
U.S. Office of Personnel Management. FERS Information – Eligibility
4
U.S. Office of Personnel Management. CSRS Information – Eligibility
5
U.S. Office of Personnel Management. FERS Information – Computation
6
U.S. Office of Personnel Management. FERS Information – Computation – Section: High-3 Average Salary
7
U.S. Office of Personnel Management. CSRS Information – Computation
8
United States Office of Personnel Management. Credit for Unused Sick Leave Under the Civil Service Retirement System
9
Defense Finance and Accounting Service. What is Military Buy Back?
10
U.S. Office of Personnel Management. Federal Employees Retirement System Information for FERS Annuitants
11
Office of the Law Revision Counsel. 5 USC 8339 – Computation of Annuity
12
U.S. Office of Personnel Management. CSRS/FERS Handbook Chapter 51 – Retiree Annuity Supplement
13
Social Security Administration. Exempt Amounts Under the Earnings Test
14
U.S. Office of Personnel Management. How is the Cost-of-Living Adjustment (COLA) Determined?
15
U.S. Office of Personnel Management. Survivor Benefits
16
U.S. Office of Personnel Management. Annuitants
17
U.S. Office of Personnel Management. Premiums
18
U.S. Office of Personnel Management. FEGLI Program Information
19
Internal Revenue Service. Publication 721 – Tax Guide to U.S. Civil Service Retirement Benefits