4 Reasons Many Federal Employees Drop FEGLI After Retirement—And Whether You Should Consider It Too

Missy E
November 14, 2025

Key Takeaways

FEGLI premiums increase significantly in retirement, often leading retirees to reconsider keeping their coverage.
Exploring alternative life insurance options and financial planning strategies can help determine if FEGLI remains a valuable choice after leaving federal service.

Understanding FEGLI and Why Many Retirees Drop It

As a federal employee, the Federal Employees’ Group Life Insurance (FEGLI) program provides a convenient way to secure life insurance coverage. However, once you retire, the costs and benefits of keeping FEGLI may shift significantly. Many federal retirees find that continuing their coverage no longer makes financial sense, leading them to explore other options.

If you’re approaching retirement or have already retired, it’s essential to weigh your choices carefully. Here’s a closer look at why many retirees drop FEGLI and whether it’s the right move for you.

1. FEGLI Premiums Rise Dramatically in Retirement

One of the biggest reasons federal retirees reconsider FEGLI is the steep increase in premiums. While you pay lower group rates as an active employee, the costs rise significantly after retirement, especially for coverage beyond the Basic option.

How FEGLI Costs Change

Basic Coverage: You can choose to keep your Basic FEGLI coverage at no cost if you opt for the 75% reduction option. However, if you want full coverage, your premiums will increase.
Option A (Standard Insurance): Premiums for this option increase every five years once you retire, making it an expensive choice for continued coverage.
Option B and Option C (Additional and Family Coverage): These costs escalate rapidly, making them unaffordable for many retirees who no longer need large death benefits.

By the time you reach your 70s or 80s, these rising premiums can become overwhelming, leading many retirees to reassess whether they truly need FEGLI or if a more cost-effective alternative is available.

Why FEGLI Premiums Increase Post-Retirement

FEGLI is structured as group life insurance, meaning premiums are pooled among employees based on age groups. When you retire, you no longer receive subsidized rates from the government, and your premiums shift to reflect individual age-related risk. Because life expectancy increases costs, older retirees pay significantly more, making FEGLI less attractive as a long-term option.

2. Your Life Insurance Needs Change After Retirement

Life insurance is designed to provide financial security to your loved ones. However, as you retire, your financial responsibilities often change.

Assessing Your Financial Obligations

Before deciding whether to keep or drop FEGLI, consider the following factors:

Do you still have dependents who rely on your income? If your children are financially independent and your spouse has sufficient retirement income, you may not need as much coverage.
Are major debts, such as a mortgage, paid off? If your financial obligations have decreased, you might not need the same level of coverage you had while working.
Do you have other financial resources? A well-structured retirement plan with pensions, Social Security, and personal savings may reduce your need for life insurance altogether.

Do Retirees Still Need Life Insurance?

Many retirees find that their need for life insurance declines with time. FEGLI is beneficial while raising a family or paying off a mortgage, but retirement often changes financial priorities. If your loved ones are financially secure, you might no longer require substantial coverage, making FEGLI less necessary and more costly.

3. Alternative Life Insurance Options May Be More Cost-Effective

FEGLI provides convenience while working, but once you retire, exploring other life insurance options may be beneficial.

What Are Your Alternatives?

If you determine that you still need life insurance, you might want to consider:

Private Term Life Insurance: If you still need coverage for a set period, private term life insurance may provide better rates than FEGLI.
Permanent Life Insurance: Whole life or universal life insurance policies can offer lifelong coverage and build cash value, though they may come at a higher cost.
Self-Insurance: If your savings and retirement funds are substantial, you may not need life insurance at all. Instead, your existing financial resources could provide for your loved ones after you pass.

When Should You Consider an Alternative?

Exploring other insurance options early—preferably before retirement—can help you lock in lower rates. Many private insurers offer better pricing than FEGLI for retirees in good health. Shopping around for other life insurance policies before making a final decision can ensure that you’re making a financially sound choice.

4. Many Retirees Opt for the 75% Reduction Option for Basic FEGLI

Federal retirees who want to maintain some level of life insurance without high costs often choose the 75% reduction option.

What Is the 75% Reduction Option?

Your Basic FEGLI coverage will gradually decrease to 25% of its original value after retirement.
The best part? This option comes at no additional cost to you after age 65.
If you do not need large death benefits but still want some life insurance in place, this can be a viable solution.

Who Should Consider the 75% Reduction?

This option is ideal for retirees who want:

A small amount of coverage without ongoing premium payments.
To avoid paying increasing rates for additional FEGLI options.
To maintain some life insurance benefits without long-term financial burdens.

For retirees who no longer need significant life insurance payouts but still want some form of coverage, this reduction option is a popular and cost-effective compromise.

Should You Drop FEGLI in Retirement? Here’s How to Decide

Ultimately, deciding whether to keep or drop FEGLI after retirement depends on your unique financial situation. Here are some key questions to ask yourself:

Can you afford the rising FEGLI premiums in retirement?
Do your loved ones still rely on your financial support?
Are there better life insurance options that suit your needs?
Would the 75% reduction option meet your goals?

By answering these questions, you can make an informed decision about whether to keep FEGLI, switch to a different policy, or forgo life insurance altogether.

Making an Informed Choice About Your Retirement Benefits

Retirement planning is all about making strategic decisions that ensure long-term financial stability. FEGLI is just one piece of the puzzle, and while it may have served you well during your working years, it might not be the best fit for your retirement.

Take the time to assess your financial needs, compare insurance options, and determine what works best for you. If you’re unsure, consulting with a licensed agent can provide clarity and guidance. To get professional advice tailored to your situation, contact a licensed agent listed on this website who can help you navigate your options.