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Three Little-Known FEGLI Premium Facts That Could Save You Thousands as You Approach Retirement

Brandon Kimmel
April 9, 2025

Key Takeaways:

Understanding the nuances of FEGLI premiums can help you optimize costs as you transition to retirement.
Adjusting your coverage before retirement could save you thousands over time while ensuring your needs are met.

Are You Paying Too Much for FEGLI Premiums?

If you’re nearing retirement as a public sector employee, you’re likely evaluating your Federal Employees’ Group Life Insurance (FEGLI) coverage. While FEGLI offers robust protection, the premium structure can be complicated, and making the wrong choices could cost you far more than necessary. Let’s explore three little-known facts about FEGLI premiums that could significantly impact your retirement finances.

1. FEGLI Premiums Increase with Age—But Timing Matters

One of the most critical aspects of FEGLI is its age-based premium structure. As you get older, the cost of certain coverage options can skyrocket, particularly for additional options like Option B and Option C. Here’s how age impacts your premiums:

Every Five Years Matters: FEGLI premiums increase in five-year increments, starting at age 35 and continuing past age 80. Each jump can represent a significant rise in cost, especially after age 60.
Age 65 and Beyond: Once you hit 65, some FEGLI coverage options offer reductions or waivers if you meet specific criteria, such as retiring with eligibility for an immediate annuity.
Planning Ahead: If you know when you’ll retire, aligning your FEGLI adjustments with these age milestones can save you from paying unnecessarily high premiums.

What You Can Do:

Evaluate your FEGLI coverage options about a year before you hit a new age bracket. This proactive step ensures you’re not caught off guard by premium increases.

2. You Can Reduce or Cancel Coverage Without Losing Your Retirement Benefits

Many federal employees assume they must maintain their full FEGLI coverage in retirement to retain any benefits. However, that’s not entirely true. You have the flexibility to:

Reduce Coverage Levels: Before retiring, you can opt for lower multiples of your salary under Option B or reduce family coverage under Option C. This adjustment directly impacts your premiums.
Basic Coverage at No Cost: After age 65, you can retain Basic FEGLI coverage without paying premiums, provided you meet eligibility criteria.
Partial Reductions: If you don’t want to drop all your coverage, you can choose partial reductions, ensuring some protection while controlling costs.

Why This Matters:

For retirees on a fixed income, high FEGLI premiums can be a strain. Adjusting your coverage strategically allows you to maintain essential protection without overspending.

How to Decide:

Review your financial situation and your life insurance needs with an eye toward retirement. If your children are financially independent or you’ve paid off major debts, you may not need as much coverage as before.

3. Your FEGLI Options During Open Season and Retirement Are Limited

Unlike health insurance, FEGLI doesn’t have an annual Open Season where you can freely change your coverage. Instead, your options are tied to life events or specific milestones:

During Employment: You can only make changes to your FEGLI coverage during qualifying life events, such as marriage, divorce, or the birth of a child. These restrictions mean you must plan well in advance.
At Retirement: Upon retirement, you’ll have a one-time opportunity to decide how much of your coverage to keep. This decision is crucial, as it can’t be changed later.
Option B and Option C: These options allow you to adjust the number of multiples or family member coverage levels, but only under specific conditions.

Why Timing Is Crucial:

Retirement represents the last major opportunity to lock in your FEGLI coverage levels. Waiting too long could mean you’re stuck paying for coverage you no longer need or losing valuable benefits.

What You Can Do:

Mark important deadlines and milestones on your calendar. Set reminders to evaluate your FEGLI coverage at least six months before retirement to give yourself ample time to make informed decisions.

The High Cost of Staying Uninformed

Failing to fully understand FEGLI premiums and options can result in:

Overpaying for Coverage: Many retirees discover they’re paying hundreds or even thousands more annually than necessary.
Inadequate Coverage: On the flip side, underestimating your life insurance needs could leave your loved ones financially vulnerable.
Missed Opportunities: Timing your adjustments correctly can lead to substantial savings and peace of mind.

How to Stay Informed:

Read Your Plan Details: Take the time to read FEGLI brochures and policy documents. Understanding the fine print can reveal opportunities to save.
Consult HR Early: Your agency’s HR department can clarify your options and help you plan for a smooth transition.
Leverage Retirement Counselors: Federal retirement counselors specialize in navigating the complexities of FEGLI and can provide tailored advice.

Making Smart Choices for a Secure Future

As you approach retirement, optimizing your FEGLI coverage is about more than just saving money—it’s about aligning your insurance needs with your lifestyle and financial goals. By understanding the nuances of age-based premiums, coverage reduction options, and timing restrictions, you can:

Ensure your loved ones are protected.
Avoid paying for unnecessary coverage.
Free up more of your retirement income for other priorities.

Retirement is a major life transition, and FEGLI is just one piece of the puzzle. Taking control of your insurance costs now sets the stage for a more financially secure future.

Secure Your FEGLI Strategy Today

Navigating FEGLI premiums doesn’t have to be overwhelming. With careful planning, you can make the most of your coverage while keeping costs in check. Remember, every dollar saved on premiums is a dollar you can spend on the retirement you’ve worked so hard to achieve.

Take action today to ensure your FEGLI decisions are working for you. Your future self will thank you.

Brandon Kimmel

Brandon Kimmel is a seasoned financial professional dedicated to helping individuals and families achieve their long-term financial goals. With a career spanning over two decades, Brandon has cultivated extensive expertise in a wide range of financial disciplines. He is passionate about providing personalized guidance and developing tailored strategies to address each client's unique needs and circumstances. His commitment to client success is the driving force behind his dedication to continuous learning and staying abreast of the latest industry developments.

Licensed since 2002, Brandon possesses a deep understanding of the intricacies of financial planning. His areas of focus include retirement planning, asset protection and preservation, 401k and IRA rollovers, income planning, life insurance, and estate planning fundamentals. This comprehensive knowledge allows him to offer holistic advice, considering all aspects of a client's financial picture to create a robust and sustainable plan for the future. He believes in empowering his clients with the knowledge and resources they need to make informed decisions and confidently navigate their financial journey.

A resident of Lancaster, California for the past 25 years, Brandon is deeply rooted in his community. He is happily married and a proud father of two children, ages 16 and 18. When he's not working, Brandon enjoys spending time with his family and actively participating in local community events. His commitment to his family and community reflects his dedication to building strong relationships and fostering a sense of trust and collaboration in all his endeavors.