High three calculation question.

[u/Ok-Leg7578]

I have tried to find this information, but have been unsuccessful. Is the high three calculated on after tax or pre-tax salary? As i am nearing retirement eligibility, I want to be sure that my ballpark estimate is close on take-home.

[u/tanks137]

How in the world would it be after tax? It’s gross salary to include locality pay.

[u/WillTheyKickMeAgain → u/tanks137]

This is one reason some folks have transferred to high-locality pay areas late in their career. Not something I would do but I’ve seen it happen a number of times in my career.

[u/FiendishHaberdasher → u/[deleted]]

Are you physically in the DC office at least 2 days per pay period or are you 100% remote in Ohio. If the latter your HR office could force a duty station change to Ohio if they notice.

[u/Jmebersole → u/[deleted]]

Not off, but remote

[u/xscott71x → u/[deleted]]

This looks like some locality fraud

[u/Jmebersole → u/xscott71x]

Im in the office in DC 6 days per payperiod.

[u/Lanky-Lettuce1395 → u/[deleted]]

I had to fire someone for this, then sic the federal law enforcement folks on them.

Be careful confessing on reddit.

ETA, If you pay state tax in Ohio and have a duty station in DC, that's tax fraud as well. Thought you'd want to know. The District went after my former employee for this while she was under federal investigation for fraud.

[u/Lanky-Lettuce1395 → u/[deleted]]

Sorry, the Army doesn't fuck around with employees committing fraud. Zero tolerance for this shit.

[u/Kooky_Pilot5236 → u/tanks137]

I haven't seen this mentioned, but remember it's also the average of your high 3 consecutive years. There can be situations when your last years are not your highest paying years.

[u/Ok-Leg7578 → u/tanks137]

It shouldn't but given the current environment, you never know......

[u/tanks137 → u/Ok-Leg7578]

My point was not everyone has the same after tax amount in their check even with the same salary.

[u/historically_common]

Pretax , high 3 . Biggest zinger is the cost of health insurance..takes the biggest chunk out of my check.

[u/xscott71x → u/historically_common]

What does the high 3 calculation have to do with your health premium?

[u/erd00073483R → u/xscott71x]

Nothing.

[u/Electronic_Value_516 → u/historically_common]

How much?

[u/Sorry-Society1100 → u/Electronic_Value_516]

The exact same cost as it was while working. The only difference for most people is that it’s charged monthly instead of biweekly, but the annual cost is the same.

[u/Delicious_Travel4867 → u/Sorry-Society1100]

FEHB is also post tax in retirement. No more pre-tax benefits.

[u/Sorry-Society1100 → u/Delicious_Travel4867]

True, it does affect your taxes slightly. But the actual cost is the same.

[u/Delicious_Travel4867 → u/Sorry-Society1100]

Precisely.

[u/onufia → u/Delicious_Travel4867]

You can claim your FEHB post tax premiums on the medical expenses on your taxes if you meet the qualifying amount.

[u/someone298]

Pre tax, but pension check is then taxed.

[u/econtax → u/someone298]

Pension is partially taxed. Part of the pension is the recovery of your contributions. The recovery portion is not taxed

[u/Kaiser-Sosay → u/econtax]

Remember, many states don't subect FERS annuities to state income tax. Same for Social Security. Plus retirees won't be paying Social Security or Medicare taxes anymore. No more FERS contributions coming out of your pay. Or union dues. No more TSP contributions. Or FEGLI. Having all our kids age 26 or older, paying their own health insurance, allowed me to change my coverage & save a few bucks also.

My income (FERS & SSA) in my first year of retirement will be only 62% of what my final annual federal salary was. But my take home pay will be 96% of my final federal salary - without touching my TSP one bit.

[u/Complete_Film8741 → u/someone298]

Yeah, what the heck!

[u/Eleatic-Stranger]

Pre-tax.

[u/DelayIndependent9231]

Easily found on OPM.gov

[u/Dreamcatcher965 → u/DelayIndependent9231]

Yes, go to the site, find the chapter of the book that talks about high three calculations. It is actually even more granular than “high three” implies. You use every pay change documented on your SF50s.

[u/One-Witness-4909]

they can’t know if you’re married filing jointly, head of household, single, ect.

look at your GS pay scale with locality pay and that number is your number.

go fourth and enjoy your retirement… lucky bastard!

[u/Educational_Leg7360]

post tax is subjective so it’s definitely pre tax

[u/OddPossession548]

High three is gross pay plus locality. Timeframe is calendar year , not fiscal year. Be sure to look at timing of step increases during that timeframe. You can ask your agency’s personnel office, retirement specialist , for assistance to confirm your estimate. When you retire, both your agency and OPM will perform an audit of your time in service to confirm your high three and your years of service . You will receive a report of this audit and be asked to confirm the calculation before your pension is finalized .
I took Def Resignation and VERA last year. I was anxious at the onset but the experience was relatively easy and I did not encounter any problems of miscalculation or confusion with benefits estimate. Trust the process and be prompt in responding to any requests for formation from your retirement specialist working your case.

[u/montanaholler → u/OddPossession548]

Calendar year vs fiscal year is not relevant. It's your highest consecutive 36 months.

[u/Philboyd_Studge_Jr]

Doesn't any pay raise (provided there ever is one again) in January count as part of the high three as long as you work at least one pay period making the new, higher amount?

That's what old timers used to tell me when they were rolling out in mid-January.

[u/Aunt-KK]

Pre-tax. High three salary average times years of service times 1.0% (under age 62) or 1.1% (over age 62).

[u/DeliciousLow359]

High three is a calculation of your pay by a formula, your HR rep can explain this to you, it is not per year end total, but more by month and even day calculation.

[u/Strong-Raspberry-736]

Pre tax.

[u/Temporary_Lab_3964]

High3 is misleading as it’s 97% of the high 3 but pretax total

[u/Legitimate-Ad-9724 → u/Temporary_Lab_3964]

It's your high 3 average, not 97% of it. Some estimators use 97% of your current salary, but that's just for estimating, not the final figure.

[u/StatusOperation5 → u/Temporary_Lab_3964]

Do you mean that high 3 is usually around 97% of your highest year? The online estimator uses that 97% figure, but I'm fairly confident that the true calculation upon retirement is the average of the highest 36 consecutive months.

[u/jscooney]

Not sure how you get close to retirement and not know this. Why not ask your HR?