Key Takeaways
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FEGLI can still serve an important purpose for certain retirees, but its value heavily depends on your age, health status, and financial goals.
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Understanding when FEGLI coverage transitions from practical to unnecessarily costly can help you avoid draining your retirement savings.
Understanding FEGLI in Retirement
As a public sector employee, you are familiar with the Federal Employees’ Group Life Insurance (FEGLI) program. It has served as a reliable and affordable life insurance option throughout your career. However, in retirement, the question becomes more complicated: should you keep it, adjust it, or drop it altogether?
- Also Read: Medicare Isn’t Just for Retirees—Here’s Why Federal Employees Should Still Pay Attention
- Also Read: FERS Changes You’ll Want to Know Before You File for Retirement
- Also Read: From Clocking In to Retiring Out: Postal Workers Are Asking These 3 Questions
How FEGLI Works After Retirement
When you retire, you have three basic choices regarding FEGLI Basic insurance:
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Continue it with the 75% Reduction option (no cost after age 65, but the coverage declines).
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Continue it with a 50% Reduction (some cost).
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Continue it with No Reduction (higher premium, full coverage maintained).
Optional coverages (Options A, B, and C) work differently. You can:
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Cancel them at retirement.
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Continue paying for them, but expect rates to climb dramatically with age, particularly after 65.
Understanding these mechanics is crucial because the costs can add up quickly if you’re not strategic.
When FEGLI Still Makes Sense in Retirement
1. You Need Short-Term Coverage
If you still have large financial obligations for the next few years — such as a mortgage, dependents finishing college, or other debts — maintaining FEGLI Basic (especially with No Reduction) could make sense. The coverage ensures your loved ones are protected during a financially vulnerable time.
2. Your Health Would Make Private Insurance Too Expensive
By 2025, qualifying for affordable private life insurance in your 60s or later can be challenging, especially if you have health conditions. FEGLI does not require a medical exam if you keep it through retirement, making it a lifeline for those who otherwise would have no coverage options.
3. You Want to Provide Final Expenses Coverage
Maintaining the Basic option with the 75% Reduction gives you a small but free benefit after age 65. While the payout shrinks to 25% of its original value, it can still help cover funeral costs or minor final expenses.
4. You Retired Early
If you retired before 65, you’re still paying full FEGLI rates without the benefit of reductions. In this case, keeping coverage temporarily until reaching Medicare eligibility or another major financial milestone can make good sense.
When FEGLI Likely Doesn’t Make Sense in Retirement
1. You No Longer Have Financial Dependents
If your children are grown, your home is paid off, and your spouse has independent financial security, the original reason you purchased life insurance may no longer exist. Paying ongoing premiums for coverage you don’t need can quietly drain your retirement resources.
2. The Premiums Outweigh the Benefit
After 65, FEGLI Option B and Option C premiums skyrocket every five years. By your late 60s and early 70s, premiums can climb steeply, often consuming hundreds of dollars monthly. When annual costs approach or exceed the death benefit’s value, it’s typically time to reconsider.
3. You Have Built Enough Savings
Many public sector retirees by 2025 have a combination of a pension, Thrift Savings Plan (TSP) withdrawals, and Social Security. If your retirement savings can comfortably cover your family’s needs and final expenses, continuing to pay for life insurance may be unnecessary.
4. You Wanted FEGLI Primarily for Income Replacement
During your working years, life insurance was about protecting your family against the sudden loss of income. Once retired, however, you typically rely on fixed income sources. If no one depends on your earnings anymore, the core purpose of maintaining FEGLI diminishes.
Financial Implications of Keeping FEGLI
Rising Costs After 65
FEGLI Basic becomes affordable (or free) after 65 if you choose the 75% Reduction, but Options A, B, and C do not. They continue to rise in price dramatically every five years. In 2025, retirees often see significant jumps at ages 65, 70, 75, and beyond.
Impact on Retirement Cash Flow
Even moderate monthly FEGLI premiums can strain a fixed retirement budget. By the time you are managing Medicare premiums, FEHB health plan premiums, and personal expenses, every dollar counts.
Before deciding to keep your FEGLI coverage, it’s essential to:
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Compare the total remaining cost of premiums against the potential payout.
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Reassess whether those premium dollars could serve you better elsewhere, such as investing, gifting, or enhancing your own retirement quality of life.
Alternatives to FEGLI After Retirement
Private Term Life Insurance
If you’re in good health, you might find that a new term life policy provides sufficient coverage for fewer dollars than FEGLI Options B and C. However, this becomes less feasible once you cross into your mid-60s.
Guaranteed Issue Life Insurance
For retirees with health concerns who cannot qualify for medically underwritten policies, guaranteed issue life insurance could be an alternative. These policies typically cost more but are available without a medical exam.
Self-Insurance
If your retirement savings are robust, you may not need to replace FEGLI at all. Self-insuring — meaning using your assets to cover your final expenses — can be the most cost-effective approach.
Final Expense Insurance
A small final expense life insurance policy may meet your needs for funeral and end-of-life costs without the hefty premiums attached to maintaining full FEGLI coverage.
Important Considerations Before Cancelling FEGLI
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Once you cancel an option, you generally cannot reinstate it later.
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Think carefully about your health status and your life expectancy.
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Ensure your spouse and heirs are financially protected before making any cancellation decisions.
Review your retirement plan holistically, considering:
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Survivor benefits from your pension
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Social Security benefits your survivors would receive
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Outstanding debts
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Funeral and estate settlement costs
How to Reevaluate Your FEGLI Decision in 2025
Since financial and personal circumstances evolve, schedule annual “retirement reviews.” Each year, revisit your FEGLI coverage and overall financial situation, asking questions like:
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Has my need for life insurance changed?
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Can I still comfortably afford the premiums?
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Are there better uses for these premium dollars now?
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Are there significant health changes that would impact other insurance options?
Life insurance should serve your financial plan, not strain it. If you find that your goals have shifted, don’t hesitate to adjust your FEGLI elections accordingly.
Making the Best Choice for Your Future
Understanding when FEGLI still serves you—and when it doesn’t—is critical to protecting your retirement stability. While keeping some form of coverage might make sense for a few years post-retirement, clinging to high-cost options for sentimental reasons can harm your long-term financial health. It’s wise to weigh your needs annually and work with a trusted licensed professional to find the right balance.
If you need guidance reviewing your FEGLI options or adjusting your retirement life insurance strategy, connect with a licensed professional listed on this website today for a personalized consultation.
