What Every Federal Retiree Should Know About Rising FEGLI Premiums Before Making a Decision

Katherine Summers
November 14, 2025

Key Takeaways:

FEGLI premiums rise significantly as you age, and understanding how these costs impact your retirement budget is critical before making a decision.
Alternative strategies can help you balance the need for life insurance with managing premium costs effectively in retirement.

Navigating FEGLI: A Key Consideration for Federal Retirees

Federal Employees’ Group Life Insurance (FEGLI) has long been a cornerstone of financial protection for federal workers and retirees. However, as you transition from active employment to retirement, the cost of maintaining FEGLI can increase sharply. Rising premiums, especially for certain types of coverage, often catch retirees by surprise, straining their carefully planned budgets.

If you’re nearing retirement or already retired, now is the time to dive deep into the details of your FEGLI coverage. By doing so, you’ll be equipped to make decisions that align with your long-term financial goals while safeguarding your loved ones.

FEGLI Basics: What Does the Program Offer?

FEGLI provides federal employees and retirees with group life insurance that can be tailored to their needs. The program includes multiple types of coverage:

Basic Insurance: This is the foundation of FEGLI, automatically covering most federal employees. Its value equals your annual basic pay, rounded up to the nearest $1,000, plus $2,000.
Option A (Standard Optional Insurance): Adds a flat $10,000 to your coverage.
Option B (Additional Optional Insurance): Allows coverage in multiples (1–5 times) of your annual basic pay.
Option C (Family Optional Insurance): Offers coverage for eligible family members in multiples of $5,000 for a spouse and $2,500 per child.

These options give you flexibility, but costs rise significantly with age, especially for Options B and C.

How FEGLI Premiums Increase Over Time

FEGLI premiums are determined by age bands, which generally span five-year increments. Each time you move into a new band—typically starting at age 50—your premiums increase. These rate hikes become more pronounced as you move through your 60s and beyond.

Key Factors Influencing Costs:

Age Bands: The cost of Options B and C doubles or triples in later years.
Retirement Status: Once you retire, you are responsible for 100% of the premiums, losing the partial subsidy active employees receive.
Reduction Options: Choosing no reduction for your Basic coverage can lead to steep premium increases.

By your mid-70s or 80s, FEGLI premiums can consume a significant portion of your retirement income, leaving many retirees reconsidering the value of their coverage.

Evaluating FEGLI Costs for Your Retirement Plan

When planning for retirement, understanding your future FEGLI costs is essential. A failure to account for these rising premiums can upset even the most well-thought-out budget.

Key Steps to Assess Your Costs:

Calculate Future Premiums: Use FEGLI’s official tools or an online calculator to project your costs over the next decade or two.
Analyze Your Retirement Income: Compare your anticipated income from pensions, Social Security, and savings to the projected FEGLI costs.
Determine Your Coverage Needs: Do you still need the same level of insurance you carried while actively working? For many, the answer is no.

A comprehensive analysis can help you identify whether maintaining full FEGLI coverage is sustainable or if adjustments are needed.

Alternatives to FEGLI: Are There Better Options?

For some retirees, rising FEGLI premiums may prompt a search for alternative life insurance options. While every situation is unique, considering alternatives can help you strike a better balance between coverage and cost.

Common Alternatives:

Private Life Insurance Policies: These often offer fixed premiums for the duration of the policy, providing predictable costs in retirement.
Self-Insurance: If your retirement savings and investments are sufficient, you might choose to forego life insurance altogether.
Hybrid Strategies: Some retirees opt for reduced FEGLI Basic coverage combined with a smaller private policy to save on premiums while retaining essential coverage.

Before committing to a new policy, thoroughly compare benefits, costs, and underwriting requirements to ensure it’s the right fit.

The Role of Health Costs in Your Decision

Life insurance is only one piece of the financial puzzle for retirees. Healthcare costs, which often rise alongside FEGLI premiums, can add further strain to your budget.

Consider These Factors:

Medicare Premiums: Most federal retirees coordinate their Medicare coverage with the Federal Employees Health Benefits (FEHB) program to manage medical expenses effectively.
Healthcare Inflation: Even with comprehensive coverage, out-of-pocket expenses for prescriptions, treatments, and long-term care can grow substantially over time.
Balancing Priorities: If healthcare becomes a more pressing concern than life insurance, reducing or altering FEGLI coverage might make sense.

FEGLI’s Reduction Options: A Closer Look

At retirement, you must decide how your Basic FEGLI coverage will change over time. This decision significantly impacts both your premiums and the eventual payout to your beneficiaries.

The Three Reduction Choices:

75% Reduction: After age 65, your coverage decreases by 2% monthly until it reaches 25% of its original value. This is the most cost-effective option for retirees.
50% Reduction: Coverage decreases to 50%, with higher premiums than the 75% option.
No Reduction: Your coverage remains unchanged, but the premiums are significantly higher, often becoming unaffordable for retirees on fixed incomes.

Understanding these choices and their financial implications is crucial to aligning your life insurance with your retirement goals.

Strategies to Manage Rising FEGLI Costs

If rising FEGLI premiums threaten to overwhelm your budget, there are proactive steps you can take to manage costs effectively.

Tips to Save Money:

Reduce Coverage: Dropping expensive options like Option B can significantly lower your premiums.
Shop Around: Investigate private policies to see if they offer better value for your needs.
Review Regularly: As your circumstances change, reevaluate your life insurance to ensure it still aligns with your priorities.
Get Expert Advice: A financial planner or insurance specialist can provide personalized guidance to help you make informed decisions.

Taking control of your coverage now can save you money and ensure your financial stability in the long term.

Balancing Coverage, Costs, and Peace of Mind

Life insurance is meant to provide financial security for your loved ones, but it shouldn’t come at the expense of your retirement happiness. Rising FEGLI premiums can be daunting, but they’re not insurmountable.

Key Questions to Ask Yourself:

How much life insurance do I genuinely need at this stage of life?
Can I comfortably afford the premiums for the next 10–20 years?
Are there other ways to provide for my beneficiaries, such as savings or investments?

Answering these questions can help you achieve the balance between coverage and affordability.

Don’t Wait to Review Your FEGLI Coverage

The sooner you assess your FEGLI coverage, the more options you’ll have. Procrastinating can limit your choices, especially as premiums rise with each new age band.

Your Next Steps:

Gather Information: Review your most recent FEGLI statement to understand your current coverage.
Project Future Costs: Use available tools to estimate how premiums will change over the next 10 years.
Explore Alternatives: Consider private policies or self-insurance strategies to supplement or replace FEGLI.
Consult Professionals: Speak with a financial advisor to ensure your plan aligns with your overall retirement goals.

Being proactive today can prevent financial stress tomorrow, giving you the freedom to enjoy your retirement.

Planning Ahead for Rising Costs

Federal retirees face unique challenges when balancing their life insurance needs with rising FEGLI premiums. By thoroughly evaluating your options, seeking expert guidance, and planning ahead, you can make choices that protect both your financial health and your loved ones’ future.