The setup
Let's meet our subject: a 42-year-old federal employee, GS-14 step 5, hired in 2014 (FERS-FRAE, 4.4% contribution rate). Base salary in the Washington-Baltimore locality: $161,486 (2026 GS pay scale). Twelve years of service. A $185,000 private offer lands in their inbox.
On the surface, this is straightforward. $185,000 is about 15% more than $161,486. Walk away from the bureaucracy, take the money, invest the difference, retire early.
Except it isn't that simple. The federal benefits package — especially the FERS pension and the FEHB retiree health subsidy — are worth far more than most people realize. The question is: how much more?
The numbers
We plug this employee's data into the HighThree estimator: birth date 1984, SCD 2014, current GS-14 step 5 at $161,486 (2026 rate), $85,000 TSP balance, contributing 5% to capture the full agency match.
Working to age 62 (20 more years), the estimator projects:
- High-3 average at retirement: ~$205,000 (assuming 2% annual pay raises)
- Years of service at 62: 32
- Pension multiplier: 1.1% (age 62 + 20+ years bonus)
- Annual pension at retirement: ~$72,300 ($6,025/month)
- TSP balance at retirement: ~$990,000
That's the "stay federal" baseline. Now let's model what happens if they leave at year 12.
The deferred pension
Leaving with 12 years of service means a deferred annuity — a reduced pension starting at age 62. The formula: High-3 at departure ($161,486) × 12 years × 1.0% = ~$19,400/year.
Compare that to the full pension at 62 if they stay: $72,300/year. The annual loss is $52,900. Every year. For life. With COLA.
The FEHB subsidy
FEHB in retirement is one of the most undervalued federal benefits. As a retiree, the government continues to pay roughly 72% of your health premium. For a family plan, that subsidy is worth approximately $12,000–$15,000 per year in foregone premium costs.
Leave federal service before retirement eligibility, and you lose this subsidy entirely. You can keep FEHB via COBRA or TCC temporarily, but the retiree subsidy vanishes. In the private sector, you're buying insurance on the open market.
TSP match
The agency contributes 1% automatically plus up to 4% matching — 5% total. On a $161,486 salary, that's $8,074/year in free money. Over 20 years, compounded at 5%, that's worth roughly $267,000 at retirement.
Most good private jobs offer a 401(k) match, so this isn't unique to the federal side. But it's worth comparing: is the private match as generous? Many aren't.
How we got there
The HighThree break-even calculator runs this in one screen. It computes the present value of the lost pension stream ($52,900/year from age 62 to life expectancy), the present value of the lost FEHB subsidy (~$13,000/year), and discounts both back to today using the user's chosen discount rate.
Then it applies the offset: the 4.4% FERS contribution the employee no longer pays. That's $7,105/year freed up to invest privately. Over 20 years, that compounds to roughly $235,000 — real money that reduces the required premium.
Net result: the private job needs to pay roughly $215,000–$220,000 just to break even on the benefits. And that's before we account for:
- Job security and layoff risk (not priced here, but real)
- Private-sector 401(k) match quality vs. TSP's rock-bottom expense ratios
- Work-life balance and PSLF eligibility (if applicable)
- The optionality of staying federal — you can always leave later, but you can't always come back
The reframing
The recruiter frames the offer as "$185K vs. $161K." The honest framing is "$185K vs. $161K + $55K in benefits you can't see on a paystub."
Or put another way: the private job needs to pay at least $215,000 just to match the total compensation of staying federal. The offer on the table falls well short of that threshold — not a win.
And that's the best case. If the private job has a weaker 401(k) match, higher health premiums, or any risk of layoff, the federal side pulls further ahead.
What to do with this
If you're the employee in this scenario, the break-even number is a negotiating tool. Print the HighThree break-even page, show the recruiter the math, and ask for $200,000+ or a benefits package that closes the gap.
If the recruiter balks, you have your answer: the offer undervalues what you're walking away from. That's not sentimentality. That's arithmetic.
Every federal employee considering a private-sector move should run their own numbers. The formulas are fixed. The inputs are personal. The answer is yours.
Run your own break-even
Enter your GS grade, step, salary, and TSP balance. Drag the departure-year slider. See exactly what premium your private offer would need to match what you'd leave behind.
Open the Estimator →