How to Estimate Your FERS Annuity to Include Pay Raises and Grade/Step Increases

“How far do you think you could advance over the course of your federal career?” I asked a younger employee recently.

“I guess I’m not sure. Why do you ask?” he replied.

This exchange was meant to highlight the reasons to be thinking proactively. One of those reasons is creating an accurate picture of FERS basic annuity estimate. The FERS pension can be a federal employee’s most valuable benefit over time, and what it may be worth in the future is not always straight-forward. 

Projecting a Future FERS Annuity

The FERS Basic Annuity projections located in a benefits summary can serve as a good starting point, but it’s important to understand this summary generally incorporates your current High-3 salary as the basis for future benefits.

There are two big things to consider when projecting a future pension amount: 

1. Grade and step increases – How will your career progress over time? It can be hard to know exactly where you’ll finish up, but I’ve found that most federal employees have a pretty good idea on how far they may advance. Consider potential ending grade and step, as well as locality pay. You can find the various GS pay tables at opm.gov. 
2. Annual pay raises / cost-of-living increases – Looking at things in today’s dollars can be useful, but it’s also important to plan for future increases. Adjusting the current GS table by reasonable cost of living increases over time will help us to understand what future dollars may look like. 

While pay raises have been all over the place in recent years, looking at a long-term history of the Consumer Price Index (CPI) and past pay raises may provide a good basis for an estimate.

Example Calculation

Let’s look at a simple example to drive these concepts home. 

A current federal employee is a 48-year-old GS-14 with 16 years of service. He is considering retiring at age 60 with 28 years of service, and potentially 2 years later at age 62 when the 1.1% multiplier would kick in. 

Advancing to GS-15 level is a big goal, and he feels GS-15 step 3 is where he could end his career.

The Washington, DC locality pay table as of January 2024 looks like this:

Grade	Step 1	Step 2	Step 3	Step 4	Step 5	Step 6	Step 7	Step 8	Step 9	Step 10
1	29299	30282	31255	32226	33198	33767	34732	35703	35742	36649
2	32945	33728	34820	35742	36145	37209	38272	39336	40399	41463
3	35947	37145	38343	39541	40739	41937	43135	44333	45531	46729
4	40351	41696	43040	44385	45730	47074	48419	49763	51108	52452
5	45146	46650	48155	49659	51164	52668	54173	55677	57182	58686
6	50326	52003	53681	55359	57037	58714	60392	62070	63748	65425
7	55924	57788	59653	61517	63381	65245	67110	68974	70838	72703
8	61933	63997	66061	68125	70189	72254	74318	76382	78446	80510
9	68405	70685	72965	75245	77525	79805	82085	84366	86646	88926
10	75329	77840	80350	82861	85372	87882	90393	92904	95414	97925
11	82764	85522	88281	91039	93798	96556	99315	102073	104832	107590
12	99200	102506	105812	109119	112425	115731	119037	122343	125650	128956
13	117962	121894	125827	129759	133692	137624	141557	145489	149422	153354
14	139395	144042	148689	153336	157982	162629	167276	171923	176570	181216
15	163964	169429	174894	180359	185824	191289	191900 *	191900 *	191900 *	191900 *

The goal–GS-15 step 3–currently pays a salary of $174,894 in DC as of January 2024. 

Pay Raise Calculations

Next, we’ll need to adjust that number for pay raises:

• At Age 60 – $174,893 @ 3% annual pay raise x 12 years = $249,357 
• At Age 62 – $174,893 @ 3% annual pay raise x 14 years = $264,543

In this scenario, the employee’s High-3 would technically be an average of the last 3 years of salary (probably something a little bit different from our calculation), but we are going to keep the math simple. You can always back out the numbers to be as precise as desired. 

FERS Annuity Calculations

Now we can look at how much the annuity may be worth:

• Age 60 — 1% x 28 years x $249,357 = $69,819
• Age 62 – 1.1% x 30 years x $264,543 = $87,299

This gives us a pension estimate based in future dollars by including potential pay raises and promotions. 

If you are working on a retirement income worksheet, make sure to include any deductions that may apply to your FERS annuity – survivor benefits, taxes, health and other insurance coverages.

Have you thought about your pension in these terms? 

I hope you find this information useful; I also publish a biweekly newsletter with insights into topics like this and more. If you’d like to join the list, please subscribe here. 

Don’t be afraid to ask questions. I’m here to help.

The content is developed from sources believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.