It depends on how well your boss likes you. Their favorites and people of their ethnicity comes first.
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As others have said, do a good job for a 3 rating, and it’s reasonable to expect a 2.5% raise. If you are under the median for your pay range, it may be .5% higher. Not worth ki-ling yourself and risking your mental health to try and get a 4 or 5. You won’t be rewarded like you would hope in your merit increase. May get a better bonus, but that’s no sure thing. The trade-off to a company that doesn’t reward well for outstanding performance is financial stability. Just do a solid job and protect your work-life balance.
I agree with the other person who responded. It is not worth it to grind away all year for the possibility of a 4 rating that is financially not that far from the 3 rating you can get by working at a comfortable pace through the year. It's worth it for your own peace of mind and work life balance to not push yourself to try and get a rating that your management can't guarantee they will always be able to give you.
As an hourly employee my average merit was 2-3%; as salaried, it's usually 3-4%. Managers (or at least in my experience when I was a manager) get a limited pool of dollars and have to use that to spread for merit so 3-4% is the most you can expect even as a high performer, unless you're lucky enough to hit the lottery of the very small percentage of people who are allowed to get an annual rating above a 3 (average). I have seen one person get a 5 rating and a 5% merit increase, I have occasionally given merit increases slightly above 4% for someone who had a 3-4 rating, but it's rare because of the constraints.
Maybe 8-10% of people are allowed to get a 4 rating (with senior leadership approval), almost no one gets a 5 rating. Unless you're an hourly customer service employee with hard stats, ratings are subjective enough that if you are doing consistently 4-5 work, you will be scored down and get a high 3. The upside is that you have to be genuinely terrible at your job to get a 1-2.
The best thing you can do for yourself imo is temper your expectations and assume you'll get a 3 and a 2.5-3.5% raise. Then anything above that is a pleasant surprise. Your manager has very little ability to improve that for you because they don't make the decisions on who gets the elusive 4 or how many total dollars they have to split between employees. A good manager will fight for you to get a 4 and give you the most they can as a raise, but giving you a higher raise means pulling dollars from everyone else on the team.
The process is set up to be incredibly demoralizing and to reward doing the bare minimum. There is very little reward for pushing yourself to go above and beyond - at best, it's only ever made a 1% difference in my merit increase. This is one of the main reasons I went back to an IC role because it su-ks having to inflict this on employees as a manager, watching engagement and morale tank, and not being able to do anything about it. Even as an IC I've gradually seen my coworkers just care less and less about the quality of their work and it is not a great environment to be in.
The good news is that if you can tolerate this and temper your expectations and not be a jerk to your manager about it at the end of the year, you'll be their favorite person.