If you are an employee of the federal government, it is beneficial to have a basic grasp of how Federal Employee Group Life Insurance works. Also known as FEGLI, this federal employee benefit works differently upon retirement compared to active employment. Therefore, those preparing to retire should take the time to understand the options available throughout retirement to reap the most rewards from their benefits through an informed outlook.
FEGLI Options
- Also Read: 3 Reasons Certain Federal Employees Can Retire Years Earlier Than Their Peers Without Penalties
- Also Read: CSRS Retirement in 2024: Are You Making the Most of What This Classic Plan Has to Offer?
- Also Read: Roth IRA Basics for Beginners: What’s There to Learn?
FEGLI Retirement Options
Any federal employee has three options in terms of Basic insurance throughout retirement. Among these choices, employees may decide between no reduction, 75% reduction, and 50% reduction. The no-reduction choice features two monthly premiums, including $2.39/$1000 of insurance for those younger than 65 and $2.07/$1,000 for those older than 65. The 75% reduction option reduces 2% each month once the policyholder retires or reaches age 65 (whichever is later) until reaching 25%. Finally, the 50% reduction features two premiums, with 1% coverage reductions each month until reaching 50%. With this reduction, policyholders pay $1.01/$1,000 of insurance per month before age 65 and $0.69/$1,000 of insurance each month after age 65.
Option A coverage reduces 2% each month until the final amount is $2,500. Once a policyholder reaches retirement or age 65, this reduction happens automatically. Options B and C provide continuous coverage (upon election) or reduced coverage once they reach age 65 or retirement (whichever occurs later). Policyholders have the option of lowering some multiples while other multiples remain unchanged. However, once coverage reduces by 2% every month, premiums will cease once coverage reduces to nothing.
Getting the Most Out of Your Benefits
By default, the FEGLI election upon retirement is a 75% reduction, in addition to dropping options B and C. It would help if you approached this type of decision as a business decision. To ensure your policy makes solid financial sense for your family, consider each option and what they entail before retirement. For many policyholders, it makes better sense to maintain complete Basic over the other options. While it makes sense for some families to keep 100% of their Basic coverage, it doesn’t work for everyone.
Contact Information:
Email: [email protected]
Phone: 8132032515
Disclosure:
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
