Methodology

FERS pension

The FERS basic benefit is a lifetime annuity. The formula is simple on its face:

The multiplier is 1.0% for most retirees, stepping up to 1.1% if the employee is at least 62 years old with 20+ years of service at retirement. We apply the 1.1% bump automatically when both conditions are met at the projected retirement date.

High-3 averaging

High-3 is the highest consecutive 36 months of basic pay at any point in your career. For nearly all federal careers the high-3 is the final three years — pay increases monotonically through annual raises and WGI step increases. We approximate the high-3 at any year Y as the simple average of basic pay for years Y−2, Y−1, Y.

Salary projection

Year-over-year salary grows by the federal pay raise percentage you set (default 2.0% under the conservative preset). On top of that, if you entered a grade and step, WGI increases are applied.

WGI step progression

Within-grade increases follow the schedule under 5 U.S.C. § 5335. Assuming an acceptable level of performance:

• Steps 1 → 2, 2 → 3, 3 → 4: every 52 weeks
• Steps 4 → 5, 5 → 6, 6 → 7: every 104 weeks
• Steps 7 → 8, 8 → 9, 9 → 10: every 156 weeks
• Step 10 is terminal — no further WGI within the grade

The step-to-step pay difference within a GS grade is approximately 3.33% per step (spreading the ~30% step-1-to-step-10 spread evenly). Since the tool accepts your current base pay directly rather than looking it up from the GS table, the WGI calculation is applied as a relative multiplier on top of the annual pay raise.

TSP growth model

Each year we compute:

The half-year growth on new contributions approximates the average timing of payroll deposits through the year. Employee contributions are capped at the IRS 402(g) limit ($23,500 in 2025), escalated each year by your chosen TSP limit growth rate. Agency match is capped at 5% of basic pay (the full FERS match: automatic 1% + matched 4%).

Break-even model

The break-even calculator asks: if you leave federal service at year Y and go to the private sector, how much extra gross salary do you need each year until your planned retirement to replicate the lifetime value of what you walked away from?

The model has four components:

1. Lost pension. Full projected pension (if you stayed) minus the deferred pension you'd be entitled to as a separated vested employee (high-3 × YOS × 1.0%, based on your salary at departure, not at planned retirement).
2. Lost agency TSP match. 5% of each year's projected salary, from departure through planned retirement, compounded at your assumed private growth rate.
3. Lost FEHB subsidy. The employer portion of health premiums in retirement, roughly $8,000/year (adjustable), inflated and discounted over your retirement horizon.
4. Back-solve the annuity. The present value of those three at departure is the required lump sum. Grown at your private rate over the years remaining until planned retirement, we solve for the annual savings that produces that future value — then gross it up for tax drag on the additional salary.

Present value of lost pension

A FERS pension is COLA-adjusted, so we value it as a growing annuity. For each year t from retirement through life expectancy:

This PV is calculated at the planned retirement year, then discounted back to the departure year at the discount rate. Default inputs: discount rate 4.0%, inflation/COLA 2.5%, life expectancy 85.

4% safe withdrawal rate

TSP balance is translated into "annual retirement income" using the 4% rule (Bengen, 1994; Trinity Study, 1998). This is a long-accepted heuristic for retirement drawdown over a 30-year horizon with a balanced portfolio. It's not a promise — it's a benchmark that makes the three income sources (pension, TSP, SS) comparable on an apples-to-apples annual basis.

Edge cases & limits

This tool deliberately keeps v1 narrow. It does not yet model:

• CSRS or CSRS-Offset (pre-1984 hires)
• Special provisions: Law Enforcement Officer, Firefighter, Air Traffic Controller (1.7% multiplier)
• Military buyback adding to creditable service
• FERS Annuity Supplement (bridge payment before 62 for full-career retirees)
• Sick leave conversion to additional service credit
• Survivor benefit election (5% or 10% pension reduction)
• Roth vs. Traditional TSP split and its tax consequences
• Part-time service proration of high-3

If you have a career profile where any of the above materially applies, treat the estimator output as an upper bound and consult your agency HR and a qualified federal-retirement advisor. These cases are on the roadmap for future versions.

Sources