Key Takeaways
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After age 65, your Federal Employees’ Group Life Insurance (FEGLI) costs can increase dramatically—especially if you’ve opted for coverage beyond the Basic plan.
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Understanding your FEGLI election options before you retire can help avoid an unexpected drain on your retirement income.
Understanding FEGLI: What You Signed Up For
The Federal Employees’ Group Life Insurance program (FEGLI) offers life insurance coverage to government employees, with optional plans that build upon the Basic coverage automatically provided. If you’re approaching retirement or already retired, it’s time to review how your costs may change—especially after age 65.
Here’s how FEGLI works in general:
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Basic Coverage
is equal to your annual salary rounded up to the next $1,000 plus $2,000. The government pays one-third of the premium while you cover the rest. -
Option A provides $10,000 in additional coverage.
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Option B allows you to select up to five multiples of your salary.
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Option C covers family members.
What Happens at Age 65
Age 65 is a critical milestone in FEGLI. That’s when premiums for optional coverage can spike unless you’ve made specific elections in advance. Here’s what shifts:
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Basic Insurance becomes free if you’re retired and eligible for an annuity. However, it starts reducing by 2% per month until it reaches 25% of its original value, unless you’ve elected No Reduction.
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Option A reduces by 2% per month after age 65 until it phases out entirely unless waived earlier.
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Option B and Option C do not reduce automatically—they continue at full coverage but at a much higher premium starting at age 65.
The Cost Shock: How It Hits
You might not feel the impact right away, but for many retirees, the hit comes in the form of:
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Significantly higher premiums every five years after age 65 for Options B and C. These increases are not minor; they can become unsustainable.
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Lack of awareness about the No Reduction option for Basic and Option B leads many retirees to discover their cost spike only after it’s too late to change.
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Budget strain when FEGLI costs start to rival or even exceed health insurance premiums.
Planning Ahead: Your Election Options
The FEGLI program offers flexibility, but the burden is on you to act before retirement. Once you leave federal service, you cannot increase your coverage—only reduce or maintain what you have. Here’s what you can do:
1. Review Your FEGLI Statement
You should start by requesting and reviewing your most recent FEGLI coverage statement. Confirm:
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What Basic and optional coverage you currently have
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What reductions you’ve elected for Basic, Option A, and Option B
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The projected premiums at age 65 and beyond
2. Understand the Reduction Choices
You have three options for Basic and Option B:
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75% Reduction: Reduces coverage over time to 25% of its original value. No premiums after age 65.
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50% Reduction: Reduces to 50% with a lower cost increase.
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No Reduction: Keeps the full coverage intact but comes with steep post-65 premiums.
Make sure you elect your preferred reduction before retiring—this cannot be changed later unless you’re still in service.
3. Compare With Your Financial Needs
Ask yourself:
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Will your survivors need the full life insurance amount after you’re gone?
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Are there other resources—like your tsp or pension—that will provide financial stability instead?
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Would it be more cost-effective to take a reduction or even cancel Option B or C before the cost hikes begin?
When the Government Stops Paying
One of the biggest misconceptions about FEGLI is that the government continues to subsidize your premiums in retirement. That’s not always the case:
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For Basic Coverage, the government continues to subsidize it only up to age 65, after which the coverage is free if you elect the 75% reduction.
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For Options A, B, and C, you pay the full premium post-retirement, and those costs rise with age—dramatically.
By age 70 and beyond, some retirees are shocked to find their Option B premiums are several hundred dollars a month—often exceeding the coverage’s actual benefit in value.
What Many Retirees Wish They’d Done Differently
Several strategic missteps come up time and again among retirees:
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Delaying FEGLI analysis until after retirement, missing the window to change elections.
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Failing to calculate the lifetime cost of keeping Option B, especially for higher multiples.
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Overestimating the need for life insurance in later years, even when no longer supporting dependents.
If you’re still working, now is the time to re-evaluate. If you’re already retired and feeling the sting, it may still be worth reducing or dropping options during the next open period for changes.
Additional Coverage Isn’t Always Better
Just because you can have more life insurance doesn’t mean you should. You need to evaluate based on:
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Your health status and longevity expectations
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Your retirement income and expenses
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Whether your survivors will face a financial shortfall
Many retirees find they’re paying for more coverage than they truly need—often out of habit rather than necessity.
FEGLI in Context: It’s Just One Piece
It’s important to see FEGLI as part of a broader retirement strategy. If you’re holding onto it purely out of fear or routine, you might be missing opportunities to:
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Shift funds toward long-term care planning
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Reduce unnecessary premiums and increase monthly income
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Explore other forms of risk protection that better suit your current phase of life
Annual Notices and Open Seasons Matter
Even if you’re retired, stay alert to any communications from OPM. While FEGLI doesn’t offer regular Open Seasons, there may be:
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Rare opportunities to adjust coverage during special FEGLI Open Seasons
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Required notices informing you of rising premiums or upcoming reductions
Ignoring these could leave you overpaying—or losing coverage you want to maintain.
Work With a Licensed Professional Before Deciding
Life insurance is a long-term commitment, and decisions made late in your career can have permanent consequences. It’s worth speaking with a licensed professional to:
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Analyze your current and future costs
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Review your retirement income and survivor needs
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Evaluate if maintaining coverage or shifting to another solution makes more sense
Make Your FEGLI Choices Count
The spike in FEGLI premiums after age 65 isn’t just a financial nuisance—it can erode your retirement security if not planned for properly. Don’t wait until the deductions hit your annuity check to take action. Review your coverage today, clarify your reduction options, and get the guidance you need to make the right call.
If you’re unsure about your next step, speak with a licensed professional listed on this website for help planning a FEGLI strategy that aligns with your long-term goals.
