Key Takeaways
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Your current FEGLI election could cost you significantly more in retirement if you don’t plan ahead.
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Understanding the long-term cost structure of FEGLI and evaluating your needs now can save thousands later.
Why FEGLI Deserves a Second Look in 2025
As a government employee, you likely enrolled in the Federal Employees’ Group Life Insurance (FEGLI) program at the start of your career. It may have seemed straightforward: basic life insurance coverage provided through your employer, with optional additional coverage you could elect based on your needs.
But as you approach retirement, your FEGLI election today can become one of the most expensive—and often overlooked—decisions that impacts your long-term financial security.
In 2025, the structure of FEGLI hasn’t changed, but the long-term financial impact for retirees continues to grow. That’s why reviewing your current election is more important than ever.
How FEGLI Is Structured
FEGLI offers several levels of life insurance:
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Basic Coverage: Automatically provided unless waived. It equals your annual salary rounded up to the nearest $1,000 plus $2,000.
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Option A: Adds $10,000 of coverage.
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Option B: Offers coverage up to five times your annual salary.
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Option C: Provides coverage for eligible family members, in units of $5,000 for spouses and $2,500 for children.
While the Basic coverage is partially subsidized by the government, you are fully responsible for the premiums of Options A, B, and C. And that’s where most retirees start to feel the pressure.
What Happens to FEGLI in Retirement
When you retire, you’re allowed to carry your FEGLI coverage into retirement if:
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You’ve been enrolled in FEGLI for the five years immediately before retirement, or from your first eligibility date.
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You’re eligible to receive an immediate annuity.
You can choose to retain Basic coverage with a 75%, 50%, or no reduction after age 65. For Options A and B, coverage automatically reduces unless you elect and pay for full continuation. These elections drastically affect your future costs.
The Age-Based Premium Trap
Starting at age 50, FEGLI Option B and C premiums increase every five years. By age 65, the monthly cost of these optional coverages can become unmanageable—especially if you opted for the maximum multiple under Option B. Premiums can double—or even triple—by the time you reach age 75.
In 2025, FEGLI remains one of the few government benefits with such a steep age-related cost curve.
Cost Patterns You Can’t Ignore
Unlike other retirement costs that remain relatively stable or adjust slightly for inflation, FEGLI costs can explode late in retirement:
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Basic Coverage (No Reduction): Keeps full death benefit but charges you permanently for it.
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Option B (Full Reduction): Automatically reduces to zero after age 65 unless you elect to pay high premiums to keep it.
Most retirees don’t realize that the longer they live, the more they pay for a benefit that may become less valuable to their financial strategy.
Comparing Cost vs. Need
Many federal retirees are paying for life insurance they no longer need. Your children may be grown, your mortgage may be paid off, and your spouse may already be protected through survivor annuity elections or other financial instruments.
Here’s how to rethink your current coverage:
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Evaluate what financial obligations would exist if you passed away today.
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Consider whether your TSP, annuity, or other investments can support your survivors.
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Look at your spouse’s financial independence. Would they need your life insurance to maintain their standard of living?
Why You May Want to Reduce or Cancel Option B
One of the most common retirement missteps is holding on to Option B for too long. Here’s why you should review this now:
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Premiums Increase Every 5 Years: What starts as a manageable monthly fee could become a budget burden post-retirement.
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You Can Reduce the Number of Multiples: If you originally elected five times your salary, you can drop to one or two multiples in retirement.
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You Can Cancel at Any Time: Retirees can reduce or cancel Option B and C coverage even after retirement.
Waiting too long to make these adjustments can cost you thousands in unnecessary premiums.
Timing Matters: When to Make FEGLI Changes
The best time to reduce or drop optional FEGLI coverage is just before or after retirement, especially when you turn 65 and are eligible for the 75% reduction benefit on Basic coverage.
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Before Retirement: Review and change your multiples. You don’t need to wait until you’re out of service.
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At Retirement: Make your final elections carefully—what you choose here sets the tone for your future costs.
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Post-Retirement: You can reduce or cancel Option B or C anytime, but once you reduce coverage, you cannot increase it later.
Don’t Assume FEGLI Is Your Only Option
Some retirees assume they have to keep FEGLI because it’s what they’ve always had. That’s not true. FEGLI is convenient, but it’s not always cost-effective in retirement.
Other insurance products might offer better long-term value depending on your age, health, and financial goals. FEGLI doesn’t require a medical exam during employment, but private coverage often does. That means if you’re healthy and under 65, shopping around before retirement could lock in better rates elsewhere.
But even if you decide to keep FEGLI, right-sizing your coverage now is key to avoiding unnecessary expense.
Understanding the 75% Reduction in Basic Coverage
At age 65—or when you retire, if later—your Basic FEGLI coverage starts to reduce by 2% per month until it reaches 25% of its original value.
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This 75% Reduction is free. You no longer pay premiums for Basic coverage.
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If you choose No Reduction, you keep the full coverage—but pay for it continuously.
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The 50% Reduction lets you retain half the coverage but comes with a smaller ongoing premium than No Reduction.
If you’re aiming for cost control, the free 75% reduction offers decent value for retirees who don’t need full coverage but still want some benefit.
Survivor Planning and Life Insurance
Life insurance isn’t just about replacing your income. In retirement, it’s often used to:
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Cover final expenses
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Offset estate taxes
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Provide a legacy
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Support a surviving spouse for a short duration
If you’ve already structured your survivor benefits through your federal annuity or TSP, your insurance needs may be lower than they were during your working years.
That’s why reviewing your FEGLI in retirement isn’t optional—it’s essential.
The Long-Term Financial Impact
Let’s summarize what failing to reevaluate your FEGLI can cost you:
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Decades of unnecessary premiums for options you don’t need.
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Reduced retirement income due to inflated insurance deductions.
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Missed opportunity to invest that money elsewhere.
While Basic coverage (with the 75% reduction) is often worth keeping, many retirees would benefit by cutting Option B entirely.
Rethinking Your FEGLI in Retirement Starts Now
If you’re still working, it’s not too early to reconsider your FEGLI choices. If you’re retired, it’s not too late to make smart reductions. Either way, the impact of your decision stretches decades into your future.
Don’t delay a decision simply because the paperwork feels overwhelming. The real cost is in doing nothing.
Speak with a licensed professional listed on this website to review your life insurance strategy in the context of your full retirement picture. A short conversation could mean long-term savings—and better peace of mind.
