FEGLI Life Insurance in Retirement
What to Keep, What to Drop, and What It Really Costs
FEGLI is convenient during your working years, but the cost structure changes dramatically in retirement — especially after age 65. Many federal employees are paying far more than necessary for coverage that will decrease anyway. Here's how to think through your FEGLI decision.
FEGLI in Retirement: The 4 Options
Basic Insurance
RequiredEqual to your salary rounded up to the next $1,000, plus $2,000. After retirement at 65, you choose how fast it reduces (0%, 1%/month, or 2%/month). The faster it reduces, the lower your premium.
Option A — Standard (Additional $10,000)
Reduces to $2,500 by age 65 with no further premiums. It's essentially a small policy that becomes nearly worthless.
Option B — Additional (1–5x salary)
This is where premiums become very expensive at older ages. At 70+, costs can be $200–$500/month for a modest coverage amount.
Option C — Family (spouse and children)
Coverage for spouse and eligible children. Spouse coverage reduces from retirement age. Premiums increase with age.
The Age-75 Problem: Option B Premium Shock
Option B premiums reset every 5 years based on your age bracket. Here's what 2x annual salary coverage costs per $1,000 of coverage per biweekly pay period:
| Age Band | Rate per $1,000 | Cost for $100K Coverage |
|---|---|---|
| Under 35 | $0.043 | $4.30/biweekly |
| 45–49 | $0.139 | $13.90/biweekly |
| 55–59 | $0.433 | $43.30/biweekly |
| 65–69 | $1.040 | $104.00/biweekly |
| 70–74 | $1.733 | $173.30/biweekly |
| 75–79 | $2.600 | $260.00/biweekly |
| 80+ | $3.467 | $346.70/biweekly |
FEGLI vs. Private Term Insurance: The True Cost Comparison
During your working years, FEGLI may be competitively priced. But as you approach and enter retirement, private term insurance is often substantially cheaper for the same coverage — especially for healthy individuals.
| Age at Purchase | FEGLI Option B (1x $100K) | Private 10-yr Term ($100K) |
|---|---|---|
| 50 (healthy non-smoker) | ~$95/mo (age 50–54 band) | ~$30–$50/mo |
| 55 | ~$95/mo | ~$50–$80/mo |
| 60 | ~$227/mo (age 60–64) | ~$100–$150/mo |
| 65 (retirement) | ~$227/mo rising to $375+ | Not available — term ended |
Private term estimates for non-smoker in good health. FEGLI biweekly rates × 26 ÷ 12 converted to monthly. Actual private premiums vary significantly by health status.
Basic Insurance: The Three Reduction Options
At retirement, you choose how your Basic insurance reduces after 65:
No Reduction (75% premium retained)
Full coverage maintained — but you pay 75% of the pre-retirement premium. Expensive but no coverage loss.
Best if you have dependents relying on the full amount.
1% per Month Reduction
Coverage reduces 1% per month from 65 to 75 — down to 50% of face value. Premiums drop accordingly.
Good balance for most retirees.
2% per Month Reduction (Free after 65)
Coverage reduces 2%/month from 65 to 75 — down to 25% of face value. Zero premium after 65.
Best if you have other coverage and want to eliminate the cost.
When Can You Change Your FEGLI Election?
FEGLI elections are tightly restricted. Unlike FEHB, you generally cannot change your FEGLI coverage during open season. Changes are only permitted during specific qualifying life events (QLE) or the rare OPM-designated open enrollment windows.
Within 31 days of a new appointment
New federal employees can elect or waive coverage at the time of hire.
Within 60 days of a qualifying life event
Marriage, divorce, death of a dependent, or similar event allows certain coverage changes.
During an OPM open enrollment
OPM occasionally opens a limited enrollment window — rare, and not guaranteed to recur.
At retirement
You make your final election (including the Basic reduction option) when you retire. This is irrevocable.
When to Drop FEGLI Coverage
FEGLI may not be the right choice in retirement if:
- →Your spouse has their own income and your dependents are financially independent.
- →Your FERS pension and Social Security will cover your spouse's living expenses without a life insurance payout.
- →Your TSP or other investments could serve the same purpose as life insurance.
- →The FEGLI premium exceeds what a comparable private term policy would cost (common at 60+).
Frequently Asked Questions About FEGLI in Retirement
Q: Can I carry FEGLI into retirement?
A: Yes, if you meet the 5-year rule: you must have been enrolled in FEGLI for the 5 continuous years immediately before retirement (or from your first opportunity to enroll, if less than 5 years). If you waived FEGLI at any point in your last 5 years of service and didn't re-enroll, you lose the right to carry it into retirement.
Q: Does FEGLI pay out if I die from a service-connected condition?
A: Yes. FEGLI is not dependent on the cause of death. It pays your designated beneficiary regardless of whether your death is service-connected, accidental, or natural. VA life insurance (VGLI, SGLI) has separate rules and may also be available to veterans.
Q: Can veterans maintain both FEGLI and VGLI?
A: Yes. FEGLI and VGLI (Veterans' Group Life Insurance) are entirely separate programs. Veterans who separated from military service can maintain VGLI (up to $500K) independently of their FEGLI coverage. The two policies do not affect each other.
Q: What is the SF-2817 and when do I need it?
A: SF-2817 (Life Insurance Election) is the form used to change your FEGLI coverage when a qualifying life event occurs. You have 60 days from a qualifying event to submit it. At retirement, your agency will process your final election through the retirement paperwork — a separate SF-2817 is not typically required.
Q: Does the FERS survivor benefit replace life insurance?
A: It depends. The FERS survivor benefit provides your spouse with a continuing pension income (50% or 25% of your annuity) after your death. If your primary concern is ongoing income for your spouse, the survivor benefit may be more valuable than a life insurance payout. However, life insurance provides a lump sum that can pay off debts, mortgages, or provide a financial buffer — which a monthly pension payment cannot.
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Model FEGLI in Your Full Retirement Income Plan
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For educational purposes only. FEGLI premiums are set by OPM and subject to change. Consult OPM or a federal benefits advisor for your specific coverage amounts.