Three FEGLI Tips That Could Save You Thousands Before You Retire

Missy E
November 14, 2025

Key Takeaways:

Managing your Federal Employees Group Life Insurance (FEGLI) coverage wisely can significantly reduce your expenses before and after retirement.
Understanding FEGLI options, costs, and benefits ensures you make informed choices that align with your retirement goals.

Start with a Solid Plan for Your FEGLI Coverage

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As you approach retirement, you’re likely reviewing your benefits package, and FEGLI deserves your full attention. FEGLI can be a valuable resource, but it’s essential to manage it strategically. By understanding how it works and exploring the options available, you can avoid overpaying for coverage you may not need or missing out on benefits that matter. Let’s break it down so you can make the best decision for your future.

Assess Your Current Coverage Needs

FEGLI offers several options, but the standard Basic coverage is the foundation for most federal employees. It’s tied to your annual salary, rounded up to the next $1,000, plus an additional $2,000. While this provides a good starting point, it’s not always sufficient for everyone.

Evaluate whether the Basic coverage aligns with your financial goals. If you have dependents, outstanding debts, or specific estate planning goals, you might need additional coverage, such as Option A (an extra $10,000), Option B (1-5 multiples of your annual salary), or Option C (coverage for eligible family members). Each option comes with its own cost structure, which increases with age.

Know When to Adjust or Reduce Coverage

FEGLI premiums increase as you age, and these costs can escalate significantly after age 50. While the program is beneficial early in your career, holding onto high levels of coverage indefinitely isn’t always cost-effective. Retirement is a critical time to reassess your coverage needs.

Determine If You Still Need Option B

Option B coverage is often popular during your working years but can become a financial burden in retirement. Since its premiums are based on your age and salary, they can grow exponentially. Ask yourself whether you still need this additional coverage or if other assets, such as retirement savings or investments, can provide similar financial security.

Consider Reducing Option C for Family Coverage

Option C covers your spouse and eligible children, but it’s not always necessary as you near retirement. If your children are financially independent and your spouse is covered under their own plan, it might be time to reduce or eliminate this option.

Leverage Post-Retirement Options Wisely

FEGLI coverage doesn’t automatically end when you retire. You can continue your Basic insurance into retirement if you meet specific eligibility criteria, such as retiring with an immediate annuity. Additionally, you can choose how much of your Basic coverage to retain—75%, 50%, or 0% reduction—which impacts your premiums and the payout amount.

75% Reduction: A Popular Choice

The 75% reduction option allows you to keep Basic coverage for life while gradually reducing the payout amount. Over time, the coverage decreases to 25% of its original value, but your premiums significantly decrease or cease altogether after age 65. This is a cost-effective option for retirees who no longer need full coverage but still want some protection.

Alternatives to FEGLI Coverage

While FEGLI is convenient, it’s worth comparing it to other life insurance options. Private policies can sometimes offer better value depending on your age, health, and coverage needs. However, be cautious when making this decision. Private insurers often require a medical exam, which can affect premiums, especially if you have pre-existing conditions.

Understand the Costs and Budget Accordingly

FEGLI costs are calculated based on your age, salary, and the level of coverage you select. Understanding these costs now can help you plan for retirement.

Age Bands and Their Impact

FEGLI premiums increase in 5-year age bands starting at age 35, with the most significant jumps occurring after age 50. If you’re nearing retirement, calculate the cost of maintaining your current coverage versus adjusting or reducing it. For example, Option B and Option C costs can double or triple as you enter higher age brackets.

The Hidden Costs of Keeping High Coverage

While maintaining maximum coverage might seem like a safety net, it’s important to weigh the costs against the benefits. High premiums can eat into your retirement income, leaving less for other priorities. By reducing unnecessary options, you can redirect those funds toward other financial goals, such as healthcare or travel.

Plan for Open Season and Life Events

Open Season is your opportunity to make changes to your FEGLI coverage. It doesn’t happen every year, so keeping an eye on announcements is crucial. Similarly, Qualifying Life Events (QLEs), such as marriage, divorce, or the birth of a child, allow you to adjust your coverage outside Open Season. Stay proactive to ensure your policy matches your current circumstances.

Take Action Now to Save Later

Procrastinating on FEGLI decisions can cost you thousands in unnecessary premiums. Here’s how to take control today:

Review Your Benefits Statement: Log into your agency’s HR portal to view your current FEGLI coverage and costs.
Calculate Future Costs: Use online calculators to estimate how your premiums will change as you age.
Consult a Financial Planner: A professional can help you determine the right level of coverage based on your overall financial picture.

Set Yourself Up for a Stress-Free Retirement

Retirement should be a time to enjoy the fruits of your labor, not worry about overpaying for life insurance. By managing your FEGLI coverage wisely, you can reduce costs, maintain adequate protection, and focus on what matters most. Don’t wait until the last minute—start planning today to secure a financially stable and stress-free retirement.

Maximize Your Retirement Benefits with Smart FEGLI Decisions

Taking a proactive approach to your FEGLI coverage can make all the difference in your retirement finances. Regularly reviewing and adjusting your policy ensures you’re not overpaying for unnecessary coverage while still protecting your loved ones. Make the most of your benefits and enjoy peace of mind knowing you’ve made informed decisions.