⚠️ Two Quiet Proposals That Could Shrink Your Pension by 20%

April 30, 2025

Congress is once again eyeing the FERS retirement system—and two proposed changes could deliver a serious financial blow to future federal retirees:

  1. Changing your pension calculation from your High-3 to your High-5 salary average

  2. Eliminating the FERS Special Retirement Supplement entirely

These aren’t just bureaucratic tweaks—they’re potentially thousands of dollars lost every year for federal employees, especially those nearing retirement or planning to retire early.

What These Changes Actually Mean

High-3 vs. High-5: Why It Matters

Currently, your federal pension is calculated based on your High-3—the average of your highest-paid consecutive 36 months.

If changed to High-5, it would stretch that average to 60 months, diluting the impact of recent raises, promotions, or high-earning years.

For those with recent grade increases, step adjustments, or COLAs, this could reduce their pension by an estimated 5–20%—a cut that lasts for life.

The Elimination of the FERS Supplement

The FERS Special Retirement Supplement (SRS) is critical for those retiring before age 62. It provides a Social Security “bridge” until full benefits kick in.

If eliminated:

  • Early retirees would face an immediate income gap

  • Many would need to tap their TSP early, risking penalties or draining balances meant for their 60s and beyond

  • Retiring before 62 could become financially infeasible

Will You Be Grandfathered In? Here's What We Know

One of the most common and urgent questions we’re hearing:

“Will I still get my High-3 pension and supplement if I retire soon?”

Here’s what we know based on current drafts and historical precedent:

  • Current retirees would likely be fully protected

  • Employees already eligible to retire at the time of passage may be grandfathered

  • Those within 3–5 years of retirement are in a gray zone—future legislation may define a transitional group

  • Mid-career and new hires are the most likely to face the full impact of both changes

Translation:

If you're within 3–5 years of retirement, this may be your last opportunity to lock in your current benefits before cuts take effect.

What You Can Do Now

Preparation and positioning are key.

  • Get a pension estimate using both High-3 and High-5 assumptions

  • Review your projected retirement date and consider if accelerating your timeline is feasible

  • Consult your agency’s retirement specialist or HR to understand where you fall on the retirement eligibility spectrum

  • Reassess your TSP strategy to offset potential income shortfalls

  • Stay engaged with lawmakers—your voice matters

Don’t Wait for the Headlines

These proposals, if passed, could reshape the retirement landscape overnight.

Early awareness gives you the edge to adapt before the rules change.

🔔 Stay subscribed to the Federal Wealth Retirement Newsletter—we’ll continue monitoring developments, decoding legislation, and helping you protect what you’ve earned.

Best,
Federal Wealth Retirement