Rising FEGLI Premiums Are a Wake-Up Call for Federal Retirees—Here’s Why

eduard hamamjian
June 26, 2025

Key Takeaways

Federal Employees’ Group Life Insurance (FEGLI) premiums increase significantly as you age, making it essential to reevaluate your coverage before retirement.
By understanding your options, you can manage rising costs and ensure your life insurance plan aligns with your financial goals.

FEGLI Premiums: The Basics You Need to Know

FEGLI is a cornerstone benefit for federal employees, offering group life insurance coverage. But as you approach retirement, you may notice your premiums climbing steeply. While it’s an excellent option early in your career, the increasing costs with age can quickly strain your retirement budget.

Here’s why this happens: FEGLI premiums are based on your age group, and every five years after age 50, these costs jump significantly. For retirees who plan to keep their FEGLI coverage, these hikes can become a financial challenge.

Why FEGLI Premiums Rise

The primary driver behind FEGLI premium increases is actuarial risk. As you age, the likelihood of life insurance claims rises, prompting insurers to charge higher premiums. While this is standard across most life insurance plans, the FEGLI program has predefined age bands that dictate your costs:

Under 35: Premiums are minimal.
Ages 35-49: Costs are still relatively low.
Ages 50-79: Premiums rise every five years, with sharp increases as you approach 65.
80 and older: Costs can become prohibitively high.

If you’re a federal employee nearing retirement, this escalating cost structure could significantly impact your monthly budget.

Understanding the FEGLI Options

FEGLI is divided into several coverage options, each affecting your premiums differently:

Basic Coverage: Automatically provided to federal employees, it covers your annual salary (rounded up to the nearest $1,000) plus $2,000. Premiums for basic coverage remain relatively stable but increase post-retirement unless you opt for reduced coverage.
Option A (Standard): Adds a flat $10,000 of coverage but comes with increasing premiums as you age.
Option B (Additional): Allows you to select coverage up to five times your salary, but the age-related premium hikes here are the steepest.
Option C (Family): Covers your spouse and eligible children, with premiums based on your age.

How Retirees Can Handle Rising Costs

If you’re approaching or already in retirement, there are steps you can take to address these rising premiums without sacrificing financial stability.

Reevaluate Your Coverage Needs

Do you need as much life insurance in retirement as you did during your working years? Many retirees find that they no longer require the full level of coverage they carried while supporting a family or paying off a mortgage. Reducing your FEGLI coverage can lower your premiums significantly.

Consider Alternative Insurance Plans

Federal retirees may explore private life insurance plans to replace or supplement FEGLI. While private plans often require medical underwriting, they can provide more affordable premiums or additional benefits depending on your health and financial goals.

Opt for a Reduction in Basic Coverage

FEGLI offers retirees the option to reduce basic coverage in exchange for stable or eliminated premiums after age 65. For example, you can choose a 75% reduction, meaning your coverage will decrease by 2% each month after you turn 65 until it reaches 25% of the original amount. This option can be a cost-effective way to retain some life insurance without the steep premiums.

Budget for Increasing Costs

If you decide to keep your FEGLI coverage, it’s crucial to account for the rising premiums in your retirement planning. By setting aside additional funds or adjusting your budget, you can mitigate the impact of these costs.

Key Milestones to Watch

Timing plays a critical role in managing your FEGLI coverage. Here’s a timeline to keep in mind as you plan for retirement:

5-10 Years Before Retirement: Assess your current FEGLI coverage and estimate future premiums. Consider whether your life insurance needs will change.
At Retirement: Decide whether to continue, reduce, or cancel FEGLI coverage.
Age 65: Be prepared for significant premium hikes unless you opt for reduced coverage.
Post-65: Monitor your coverage and budget as premiums rise or benefits decrease.

Weighing the Pros and Cons

Deciding whether to keep or adjust your FEGLI coverage is a personal choice that depends on your financial goals, health, and family needs.

Advantages of Keeping FEGLI

Ease of Enrollment: FEGLI doesn’t require medical underwriting, making it accessible regardless of your health.
Convenient Payroll Deductions: Premiums are automatically deducted from your annuity.
Guaranteed Coverage: FEGLI ensures your beneficiaries receive a payout upon your death.

Disadvantages of FEGLI

Rising Premiums: Costs can become unsustainable in retirement.
Limited Customization: Coverage options are rigid compared to private plans.
No Cash Value: Unlike some private life insurance policies, FEGLI doesn’t accumulate cash value or offer investment options.

Planning for a Secure Retirement

Managing your FEGLI premiums is just one aspect of securing your financial future in retirement. A holistic approach to retirement planning can help you navigate other potential costs, such as healthcare, housing, and inflation.

Coordinate with Other Benefits

If you’re eligible for federal health benefits, such as FEHB or Medicare, ensure your plans work together to provide comprehensive coverage. Likewise, consider how your FEGLI coverage complements your Thrift Savings Plan (TSP) and Social Security benefits.

Review Annually

Your financial situation and life insurance needs may change over time. Make it a habit to review your FEGLI coverage and other benefits annually to ensure they align with your goals.

Seek Professional Advice

A financial advisor familiar with federal benefits can provide personalized guidance. They can help you compare options, calculate costs, and make informed decisions about your FEGLI coverage.

Is FEGLI the Right Fit for You?

Ultimately, the decision to keep, modify, or cancel your FEGLI coverage is yours. By understanding how premiums work and exploring alternatives, you can make choices that align with your needs and budget.

Remember, life insurance is a tool to protect your loved ones, not a one-size-fits-all solution. Evaluate your options carefully, and don’t hesitate to adjust your coverage as circumstances change.

Secure Your Financial Peace of Mind

Retirement should be a time of security, not stress. By addressing rising FEGLI premiums head-on, you can protect your finances and focus on enjoying your golden years. Stay proactive, plan ahead, and make decisions that empower you to live the retirement you deserve.

Eduard Hamamjian

Over the past 35 years, I've purchased, sold, and developed multiple businesses and properties. This hands-on experience has given me a unique depth of expertise in all aspects of my counsel and advice. I find tremendous satisfaction in helping others, and I consider it a privilege to assist my clients in achieving their life goals.

My journey has been a remarkable one. In 1965, my parents gifted me the opportunity to emigrate from the former Soviet Union to the United States under the most challenging circumstances. Fast forward to 2023, and my wife and I were ringing the closing bell of the New York Stock Exchange. This is the kind of story that can only happen in America.

I'm a self-confessed analytical, and I relish the daily grind of crunching numbers. The time I spend counseling my clients provides me with immense satisfaction. I was born in Armenia, but I grew up in Cranston, Rhode Island. From an early age, through sports, I learned that real success is a by-product of discipline, execution, and calculated risk. There are no shortcuts in life, and the rewards we reap tomorrow are a direct result of what we are willing to do today.

When I'm not working, you can find me on the dance floor, practicing ballroom dancing, or playing a game of table tennis. I also enjoy boating. But above all, what I cherish the most is spending quality time with my family and friends. These moments are priceless and remind me every day why I strive to help others achieve their goals.

Disclosure: The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.