Key Takeaways
- FEGLI costs and coverage options shift significantly after retirement, depending on your plan choices.
- Understanding the available reductions and eligibility rules can help you make informed, budget-conscious decisions.
Many federal retirees rely on FEGLI, but post-retirement premiums and coverage details can surprise even the most prepared employees. Knowing what changes and how to weigh your choices now can help put your coverage and costs on solid footing for the years ahead.
What Is FEGLI Post-Retirement?
Overview of FEGLI coverage
FEGLI, or Federal Employees’ Group Life Insurance, is the largest group life insurance program in the world and available to most federal employees. It provides term life insurance, designed to help protect loved ones from financial strain following a federal worker’s death. As you transition into retirement, understanding how FEGLI coverage operates is essential.
FEGLI consists of a Basic coverage plan (which most employees carry automatically) and several additional Optional coverage tiers. Coverage as a retiree continues under certain rules set by the Office of Personnel Management (OPM). Post-retirement, the choices you make—around what to keep and how much to reduce—can affect both coverage value and monthly premiums over time.
Basic vs Optional coverage types
FEGLI is divided into:
- Basic insurance: This is the foundation of FEGLI coverage. It provides a benefit amount based on your salary and includes accidental death and dismemberment protection until retirement. After you retire, you can elect an ongoing reduction in Basic coverage and decide if you want to pay for reduced or unreduced benefits.
- Optional insurance: Three additional options—Option A (Standard), Option B (Multiple of Salary), and Option C (Family)—let employees and retirees supplement the Basic coverage. These Optionals generally allow more tailored protection but come with different cost structures, particularly as you age.
Your decisions about these coverage types at retirement will set your ongoing costs and benefits.
How Do FEGLI Premiums Change in Retirement?
Premium adjustments after separation
Once you separate from federal service and retire, your FEGLI premiums do not simply stay the same. For most, the last pay period deductions continue for an additional month (free of charge), and then post-separation premiums begin. The OPM administers billing for retirees, usually through pension payments. Basic insurance offers several choices:
- 75% Reduction Option: Premiums for the Basic plan stop at age 65 (or after retirement if later), with coverage gradually reducing by 2% each month until it reaches 25% of the original amount.
- 50% Reduction Option: Premiums decrease at age 65, with coverage reducing to 50% over time.
- No Reduction Option: Premiums are higher and continue for life; full coverage amount remains in place.
For Optionals (A, B, and C), coverage continues as long as you pay premiums. Unlike Basic, these costs do not stop at age 65 and tend to increase with age in five-year increments due to actuarial tables and longevity risk.
Age factors in premium changes
Your age at retirement and going forward is a key factor for FEGLI costs. For Optional insurance, rate tiers are established in five-year bands—typically jumping at ages 50, 55, 60, 65, and beyond. As a result, premiums may become a more sizeable budget item, especially if high levels of optional coverage are retained into your 60s and 70s. Understanding when rate increases occur helps with long-term financial planning.
Which FEGLI Options Remain Available?
Eligibility for continued coverage
Not every federal retiree can keep FEGLI coverage. According to OPM rules, you must:
- Have been insured under FEGLI for at least five years immediately before retiring or since your first chance to enroll, if less.
- Retire on an immediate annuity.
- Not convert to a private individual policy in lieu of continuing group coverage.
Otherwise, FEGLI coverage can lapse and cannot be reinstated later. Meeting eligibility rules is essential to keep your options open.
Choosing among Basic and Optionals
At retirement, you can:
- Elect to keep or decline each available coverage component.
- For Basic insurance, choose among the full (No Reduction), partial (50% Reduction), or maximum reduction (75% Reduction) versions.
- For Optionals, keep as many multiples or family units as eligible. However, each carries its own ongoing premium structure.
Decisions are generally irrevocable after a short post-retirement window, so it’s important to weigh them carefully for your long-term needs and budget.
What Are the Cost Considerations?
Coverage reduction impacts
Opting for a reduction in FEGLI coverage after retirement—especially with the Basic plan’s 75% or 50% reduction—drastically lowers your future premiums. Yet, this also reduces payout amounts for beneficiaries. Unreduced coverage maintains a higher financial benefit but comes at a much greater lifetime cost. For Optionals, keeping high multiples into advanced age can become expensive.
The trade-off between ongoing cost and retained benefit means you’ll need to balance desired financial protection with sustainable premiums over time.
Budgeting for ongoing FEGLI costs
Because FEGLI Optional premiums rise sharply with age and Basic coverage can have lifetime premiums (if unreduced), it is important to forecast:
- How long you expect to retain coverage
- How rising premiums might affect your retirement income
- The value your beneficiaries might actually receive
Federal retirees often re-evaluate FEGLI during transitions like major birthdays, changes in health, or when a spouse’s coverage needs shift. Planning ahead and using OPM’s published premium tables (available on their site) allows for informed budgeting over potentially decades of retirement.
Are There Alternatives to FEGLI in Retirement?
Other federal and government coverage options
Beyond FEGLI, some federal retirees consider alternative or supplementary coverage through:
- Federal Employees Health Benefits (FEHB), which covers health rather than life insurance needs
- Veterans’ Group Life Insurance (VGLI) for eligible military retirees
- Temporary Continuation of Coverage (TCC) for those separating early (not retiring)
While these programs work differently from FEGLI, being aware of their rules helps you compare and coordinate benefits.
Considerations for maintaining versus alternatives
When deciding whether to keep FEGLI or switch to other options, consider:
- Your ongoing health and expected longevity
- Your household’s future financial needs
- The simplicity of keeping coverage versus the complexity (and eligibility restrictions) of alternatives
Some retirees may find that reducing or ending FEGLI coverage makes sense if the premiums outpace the intended benefit. Others may keep at least the Basic plan—especially if the cost is minimal after age 65 under the 75% reduction scenario.
FEGLI Retirement FAQs
Who can keep FEGLI after retirement?
You can retain FEGLI after retiring if you were insured for the five years immediately preceding retirement (or since first becoming eligible) and retire on an immediate annuity. These rules apply to both basic and Optional plans. If you do not meet these rules, continued coverage is not permitted according to OPM regulations.
How long does coverage last?
FEGLI coverage can last for life, provided you maintain eligibility and pay required premiums. Basic insurance with a reduction option eventually reduces payout but incurs little or no premium cost in later years. Optionals remain in force as long as you pay premiums, though many retirees reduce or cancel them as costs increase with age.
