Key Takeaways:
- Rising Premiums for Older Employees: Premium costs for optional FEGLI coverage are increasing in 2024, significantly affecting federal employees aged 50 and older. It’s crucial to reassess your coverage needs to manage costs effectively.
- Review Optional Coverage Levels: With adjustments to coverage options, federal employees must reevaluate their life insurance strategies to ensure their FEGLI plan remains aligned with their financial goals and family needs.
FEGLI Changes Coming Your Way—How Federal Employees Are Reconsidering Their Life Insurance Needs
- Also Read: How Law Enforcement Officers Are Making the Most of Special Retirement Perks and Early Exit Options
- Also Read: Balancing Social Security and Federal Pensions: What Every Employee Should Consider in 2025
- Also Read: Rising FEGLI Premiums: Should You Keep Your Coverage or Consider Other Options?
Navigating the Rising Costs of FEGLI
FEGLI premiums are set to rise for various optional coverage plans, particularly for those over 50. As federal employees age, the cost of maintaining higher levels of life insurance through FEGLI increases dramatically. For instance, an employee in their 60s with multiple options under FEGLI may face steep premium hikes that make their current plan less viable for retirement. Evaluating these costs is crucial to ensure you are not overpaying for coverage you may no longer need.
Adjustments to Optional Coverage Plans
The changes to FEGLI in 2024 also include modifications to optional coverage options. FEGLI’s Option B, which allows coverage at multiples of your salary, has become increasingly costly with age. Many employees who previously opted for higher multiples might find these rising costs prohibitive. It’s essential to reassess whether maintaining such levels of coverage is necessary as you near retirement. Dropping a few multiples could significantly reduce your premiums without compromising financial protection for your family.
Similarly, Option C, which covers spouses and dependents, is another area where costs may be reevaluated. As dependents age out or become financially independent, maintaining this additional coverage might not be the most practical financial decision. Reviewing these options helps ensure that the insurance plan remains both adequate and affordable.
Basic Coverage: Is It Enough?
For many federal employees, the basic FEGLI plan, which provides coverage equal to one’s annual salary (rounded up) plus $2,000, may suffice as they transition into retirement. This basic coverage remains relatively affordable as the government subsidizes a portion of the premium. Employees who have built up other savings or life insurance policies may find that sticking with basic FEGLI is sufficient. By opting for the basic plan alone, retirees can minimize expenses while still providing some financial protection.
Steps to Take Before Retirement
With the upcoming changes, it’s vital for federal employees to be proactive in managing their life insurance needs. Here are a few strategies:
- Reevaluate Coverage Annually: Regularly review your FEGLI coverage to ensure it aligns with your financial goals. If you have paid off debts or if your dependents are no longer financially reliant on you, reducing optional coverage can save on premiums.
- Plan Ahead for Premium Increases: Federal employees should anticipate premium hikes as they age. Planning for these increases can help you make informed decisions about maintaining, reducing, or transitioning your coverage to private alternatives if needed.
- Explore Private Life Insurance Options: For some, private life insurance may offer a more cost-effective solution, especially if FEGLI premiums become too burdensome. Private plans might offer fixed premiums and other benefits, which can be advantageous as federal employees age. Comparing these options ensures that you are getting the best value for your investment.
Is FEGLI Right for You in Retirement?
Deciding whether to maintain FEGLI coverage in retirement depends on individual financial goals, health status, and available resources. Some retirees may choose to keep basic coverage because it offers lifetime benefits with a relatively low premium, especially if you opt to reduce the coverage by 50% or 75% as permitted. However, maintaining high levels of optional coverage may not be feasible due to the rising costs associated with age.
Timing Is Critical
Federal employees must also be aware of the timing for making changes to their FEGLI coverage. Open enrollment periods are rare, and without a qualifying life event, altering coverage typically requires a physical exam. Therefore, it is essential to make adjustments while still active in the workforce, especially before premium costs rise further in retirement.
Keeping Costs Manageable: The FEGLI Advantage
Despite the challenges, FEGLI remains a vital benefit for many federal employees, providing flexibility and guaranteed coverage without the need for a medical exam at the time of hire. By proactively managing your FEGLI plan and staying informed about the upcoming changes, you can maintain the right level of life insurance coverage without overpaying.
Assessing Your Life Insurance Strategy
Before making any decisions, federal employees should evaluate all aspects of their life insurance plan. Comparing FEGLI’s coverage and costs against private insurance options can help determine whether adjusting your federal plan or transitioning to a private one is the best choice for your financial future. The objective is to strike a balance—ensuring enough coverage to protect your loved ones while avoiding excessive premiums that do not align with your needs.
Making Informed Choices for Financial Security
As 2024 brings changes to FEGLI, the key is to stay informed and take proactive steps. Regularly reviewing your plan, considering alternative coverage, and understanding how these updates impact your financial planning are essential for ensuring that your life insurance remains a valuable asset rather than a financial burden.
