Key Takeaways
- FEGLI coverage can be maintained after retirement, but premiums and coverage amounts are subject to change per OPM guidelines.
- Understanding reduction options and long-term costs is essential for making informed FEGLI decisions as a federal retiree.
If you’re approaching retirement from federal service, it’s important to understand how your Federal Employees’ Group Life Insurance (FEGLI) benefits may change. Choices you make about your FEGLI coverage can influence your premiums, coverage levels, and long-term retirement costs. Here’s what you need to know about FEGLI after retirement.
What Is FEGLI Coverage After Retirement?
Overview of FEGLI program
FEGLI is the largest group life insurance program for federal employees and retirees. It’s administered by the Office of Personnel Management (OPM) and has provided basic and optional life insurance coverage to federal workers for decades. FEGLI includes Basic coverage, as well as several types of Optional coverage (Options A, B, and C) that you may have carried during your federal career.
Eligibility for retirees
To continue your FEGLI coverage after retirement, you generally must have been covered for the five years just before your retirement—or for all your federal service if less than five years. If you meet this requirement, you’re eligible to keep Basic and, in many cases, your selected levels of Optional insurance.
How retirement affects coverage
At retirement, you’ll be given choices about how much of your FEGLI coverage to keep, whether to accept reductions, and which levels of Optional insurance you’d like to retain. These decisions affect both your ongoing life insurance protection and your future premiums.
How Do FEGLI Premiums Change?
Standard premium structures
FEGLI premiums are based on your age and the type and amount of coverage you hold. While you’re working, your agency covers a portion of the Basic FEGLI premium. After retirement, you become responsible for the entire premium, and costs can increase, especially for Optional insurance as you age. Premiums are generally deducted from your retirement annuity.
Reductions and options at retirement
Retirees may choose among three reduction options for Basic insurance: 75% Reduction, 50% Reduction, or No Reduction, affecting how much coverage (and premium) remains as you age. With the 75% and 50% Reduction options, coverage decreases over time after age 65, and premiums typically decrease or stop for Basic coverage with the 75% election. For Optional coverage, you can elect to retain, reduce, or drop coverage at retirement, but the cost for most options increases in five-year age bands.
Official OPM guidelines
OPM provides periodic updates on FEGLI premiums and outlines all choices available to retirees in official publications and through the OPM website. The options, eligibility, and premium rates for continued FEGLI coverage after retirement are set by federal statute and are subject to periodic review.
What Are the Main Pros?
Continued government-backed coverage
FEGLI allows you to maintain some level of government-backed life insurance even after you leave federal employment. For many, this creates a measure of security and a seamless transition from work into retirement, without needing additional underwriting.
Automatic participation options
If you meet eligibility, FEGLI makes it possible to continue coverage automatically at retirement—no new application or medical exam is required. This can be especially valuable if you would have difficulty qualifying for private life insurance later in life.
Potential for coverage flexibility
FEGLI’s structure permits you to tailor your coverage level to your changing needs and budget in retirement. You may choose to reduce coverage (and cost), drop certain Optional types, or convert some coverage to an individual policy if applicable.
What Are the Main Cons?
Ongoing premium responsibilities
After retirement, you are responsible for the full cost of your FEGLI premiums, which may be significantly higher than what you paid as an employee, especially for Optional coverage or if you choose a No Reduction option for Basic.
Coverage reductions over time
If you select the common 75% Reduction for your FEGLI Basic, your insurance amount will decrease after age 65, eventually dropping to 25% of the initial amount (with no premium due for Basic at that level). Optional coverage similarly ends or reduces, often leaving a much lower benefit.
Limited adjustment options
After retirement, your ability to increase coverage is limited or non-existent under FEGLI rules. Most changes are restricted to reductions or cancellations, not expansions, and election windows are generally final unless there’s a qualifying life event or open enrollment, which are rare.
Can Coverage Be Reduced or Continued?
Reduction choices at retirement
At retirement, you choose between several reduction options for Basic and whether to keep or lose each piece of Optional coverage. The 75% Reduction for Basic is the default if no election is made.
How reductions affect costs
Choosing a reduction means your monthly costs can decrease or even stop (for Basic with the 75% Reduction after age 65), but it also means your payout benefit to beneficiaries will go down. No Reduction coverage keeps benefits steady but at a higher, lifelong premium.
Permanent continuation rules
Once you finalize your FEGLI elections at retirement, most decisions are permanent. You may cancel coverage or drop certain options, but adding new FEGLI insurance or increasing your coverage is not generally permitted post-retirement.
How Do Costs Compare Over Time?
Trends in premium changes
FEGLI Optional premiums typically increase with age, sometimes sharply in later years. Basic coverage cost may stop entirely after reductions take full effect, but the lasting outlay for continued coverage can add up over a long retirement.
Longevity effects on total cost
The longer you live, the more premiums you’ll pay for any continued Optional or No Reduction Basic coverage. For some retirees, the total paid in premiums over several decades may exceed the value of the benefit at life expectancy, especially at older ages.
Budgeting considerations
It’s wise to estimate your expected FEGLI premium outlays in retirement, factoring in cost of living and potential changes in your needs or family situation. Staying proactive can help you avoid surprises in your retirement budget.
What Alternatives Can Retirees Consider?
Other federal coverage options
Federal retirees sometimes have other group benefits, such as survivor annuities or Thrift Savings Plan (TSP) accounts, that can help address family financial needs if FEGLI coverage is reduced or discontinued.
Maintaining personal life insurance
You may choose to maintain a separate, individual life insurance policy unrelated to FEGLI. These policies generally have their own cost, underwriting, and benefit rules and can fill gaps left by group options.
Weighing needs versus FEGLI
It’s important to reflect on your actual financial protection needs in retirement. For some, reducing or dropping FEGLI after retirement makes sense, while others may prefer to keep some government-backed coverage for peace of mind.
