4 Reasons Why Many Federal Retirees Choose to Drop FEGLI—And Whether You Should Too

Missy E
November 14, 2025

Key Takeaways:

Federal Employees’ Group Life Insurance (FEGLI) can become significantly more expensive in retirement, prompting many retirees to reconsider its value.
Before dropping FEGLI, you should carefully assess your personal financial needs, health status, and alternative life insurance options.

Understanding FEGLI and Its Role in Your Federal Retirement

FEGLI has been a staple of your federal benefits throughout your career, offering life insurance coverage that adjusts with your salary and employment status. While this program provides financial protection during your working years, many federal retirees find themselves questioning whether it’s still worth keeping after they leave the workforce.

The decision to drop or keep FEGLI in retirement isn’t one-size-fits-all. Several factors come into play, from increasing premiums to alternative financial strategies that could make more sense for your situation. Here’s why many retirees choose to drop FEGLI and what you should consider before making your own decision.

1. The Rising Cost of FEGLI Premiums in Retirement

FEGLI is structured to provide affordable coverage during your working years, but once you retire, the cost structure changes—often drastically. If you maintain coverage beyond your federal service, you’ll notice that your premiums increase significantly as you age.

How FEGLI Costs Change Over Time

Pre-Retirement: While employed, your FEGLI premiums are deducted from your paycheck at group rates, making it relatively inexpensive.
Post-Retirement: Premiums increase dramatically once you leave federal service, especially for the optional coverage levels. The older you get, the more you pay.
Age-Based Increases: By the time you reach your 70s or 80s, FEGLI costs can take up a large portion of your retirement income, making it an unsustainable option for many.

The financial burden of rising premiums often forces retirees to reconsider whether maintaining FEGLI is the best use of their retirement income. Given the substantial costs, some retirees find that the premiums outweigh the benefits, especially when they have fewer financial obligations.

Additionally, once you turn 65, you have the option to reduce or eliminate certain FEGLI coverages. Many retirees choose this option to avoid paying higher premiums that eat into their fixed retirement income. If you’re looking to manage expenses in retirement, dropping FEGLI could free up a significant amount of money that can be better allocated elsewhere.

2. Reduced Need for Life Insurance in Retirement

Many federal retirees no longer need as much life insurance as they once did. Life insurance is primarily designed to replace lost income for dependents, cover debts, and provide financial security in case of an unexpected passing. But in retirement, your financial situation has likely shifted.

Key Considerations Before Dropping FEGLI

Are You Debt-Free? If you’ve paid off your mortgage and other significant debts, you may no longer need a large life insurance payout.
Are Your Dependents Financially Independent? If your children or spouse can manage without your income, life insurance might not be as critical.
Do You Have Other Assets? If you’ve built a solid financial portfolio with retirement savings, investments, and other assets, you may not need life insurance to provide for your loved ones.

For many retirees, maintaining an expensive policy no longer makes sense when their financial obligations have decreased. If you have built up substantial retirement savings, own your home outright, or have investments to support your family, the need for life insurance diminishes. Instead of paying expensive premiums, you may be better off redirecting those funds into an emergency savings account, a health savings account, or additional retirement investments.

3. Exploring More Cost-Effective Life Insurance Alternatives

While FEGLI is convenient for federal employees, it’s not necessarily the most cost-effective life insurance option for retirees. If you still need life insurance coverage, you may find better rates and more flexible policies elsewhere.

Alternative Insurance Options to Consider

Term Life Insurance: If you only need coverage for a specific period, term life policies can provide a more affordable option compared to FEGLI.
Permanent Life Insurance: If long-term coverage is your priority, permanent life policies might offer better value than the rising costs of FEGLI.
Self-Insuring: Many retirees choose to rely on their retirement savings instead of maintaining costly insurance policies.

Before making any decisions, compare options and consider speaking with a licensed agent listed on this website who can help you explore tailored solutions. Many retirees find that by shopping for private life insurance policies or adjusting their coverage amounts, they can secure better rates and more comprehensive benefits than FEGLI provides in retirement.

4. The Impact of FEGLI on Your Retirement Budget

Your retirement income is finite, and every dollar matters. If you’re concerned about financial stability in retirement, keeping an expensive life insurance policy might not be the best use of your funds.

Financial Trade-Offs: Is FEGLI Worth It?

Healthcare Costs: With healthcare expenses rising, extra savings could be better used for medical bills and long-term care.
Leisure and Travel: Retirement should be a time to enjoy life. Dropping an unnecessary expense like FEGLI could provide more flexibility for travel and hobbies.
Emergency Savings: Redirecting funds toward an emergency savings account may provide more peace of mind than maintaining costly insurance coverage.

Many retirees find that reallocating their FEGLI premiums to other areas of their budget leads to a more comfortable and financially stable retirement. Given the increasing costs of healthcare and the importance of having liquid assets, dropping FEGLI could provide financial relief and greater flexibility in managing retirement income.

What Should You Do? Evaluating Your Own Situation

Deciding whether to keep or drop FEGLI requires a close evaluation of your personal financial situation. Here’s how to determine what’s right for you:

Steps to Take Before Making a Decision

Review Your FEGLI Premiums: Check how much your premiums will increase in the coming years.
Assess Your Financial Security: Determine if you have enough retirement income, assets, and savings to support your loved ones without life insurance.
Compare Insurance Alternatives: Look into other life insurance options to see if there’s a better fit for your needs.
Seek Expert Guidance: Consult a licensed agent listed on this website who can help you weigh your options based on your unique circumstances.

Making the Right Choice for a Secure Retirement

FEGLI served a vital role during your working years, but it’s not always the best fit for retirees. The rising costs, reduced insurance needs, and availability of better alternatives lead many federal retirees to drop their FEGLI coverage. However, your decision should be based on a careful assessment of your financial situation and future goals.

Before making any changes, consult with a licensed agent listed on this website. They can provide expert guidance tailored to your unique needs, helping you make an informed decision about your life insurance and overall retirement strategy.