Why Your Final Years of Federal Pay Matter More Than You May Think

New data from OPM shows the average federal salary has climbed above $112,000 for the first time. While that’s an interesting milestone, the bigger takeaway for employees nearing retirement isn’t the average salary itself. It’s what your own salary in the final years of your career could mean for the rest of your retirement.

Your Pension Is Built on Your Highest Earnings

Under FERS, your pension is calculated using your High-3 average salary, which represents your highest 36 consecutive months of basic pay. Because those years often occur at the end of a federal career, raises, promotions, and locality pay adjustments late in your career can have a lasting impact on your retirement income.

For an employee earning approximately $112,000 with 25 years of creditable service and eligible for the 1.1% pension multiplier, the annual FERS annuity would be about $30,800 before deductions.

That monthly pension provides an important source of retirement income, but it was never intended to stand alone.

Retirement Income Is More Than Your Pension

Most federal retirees rely on three primary income sources: their FERS pension, Social Security, and the Thrift Savings Plan.

As of February 2026, the average FERS participant held approximately $220,400 in their TSP account. Together, those three components create the foundation of retirement income. Whether they’re enough depends on factors such as spending needs, retirement age, and how long retirement lasts.

Small Pay Changes Can Have Long-Term Consequences

Because your High-3 affects every future pension payment, salary changes near retirement can have a larger impact than many employees realize.

A delayed promotion, a missed within-grade increase, or even a pay freeze during your highest-earning years can lower your High-3 average. While the difference may seem modest at the time, it carries forward into every monthly pension payment for life.

One analysis found that a single-year pay freeze for an employee retiring after 30 years of service could reduce lifetime pension income by more than $13,000 compared with receiving even a modest salary increase.

Planning Before Retirement Pays Off

As retirement approaches, understanding how your salary, years of service, TSP balance, and Social Security benefits fit together becomes increasingly important.

Many federal employees spend years focusing on their next promotion or annual raise without realizing how those decisions may influence their retirement income for decades.

A Federal Retirement Consultant (FRC®) can help you estimate your FERS pension, evaluate your complete retirement income picture, and better understand how today’s decisions may affect tomorrow’s retirement. Schedule your complimentary benefits review today.