FEGLI Sounds Simple at First—Until You Look at the Premiums After Age 60

Key Takeaways

• FEGLI coverage becomes significantly more expensive after age 60, especially if you retain full Option B or Option C coverage.

• Careful evaluation of your financial needs and available alternatives is essential before deciding whether to continue, reduce, or cancel your FEGLI coverage in retirement.

Why FEGLI Matters in Retirement Planning

If you’re a government employee nearing retirement, chances are you’ve participated in the Federal Employees’ Group Life Insurance (FEGLI) Program for years without giving it much thought. It offers basic and optional life insurance at group rates, is payroll-deducted, and covers you while you’re actively employed. It seems simple—until you turn 60 and the premiums for optional coverage begin to rise dramatically.

At this stage, FEGLI becomes more than a line item on your paycheck. It becomes a strategic decision that can significantly impact your retirement budget.

Understanding What You Have

FEGLI coverage includes:

• Basic Insurance: Automatically included unless waived. The coverage equals your annual salary rounded up to the next thousand, plus $2,000.

• Option A: Provides $10,000 in additional coverage.

• Option B: Allows you to elect coverage in multiples of 1 to 5 times your annual salary.

• Option C: Offers coverage for eligible family members in units of $5,000 for a spouse and $2,500 per child.

Premiums for Basic insurance are generally shared with the government while you’re employed. Optional coverage (A, B, and C) is fully paid by you and increases in cost as you age.

What Changes at Age 60?

Once you retire and turn 60, the following changes occur:

• You begin paying premiums entirely out-of-pocket.

• Premiums increase every five years for Options B and C after age 60, jumping significantly at ages 65, 70, 75, 80, and so on.

• You must decide whether to reduce or keep your optional coverage. FEGLI offers different reduction choices that take effect at age 65 or when you retire, whichever is later.

The most common mistake? Not reviewing or adjusting your FEGLI elections before the higher premiums begin to hit.

The Real Cost of Option B in Retirement

Option B is where most retirees feel the financial pressure. While it’s helpful coverage during your working years, continuing it into your 60s and beyond can become costly. Here’s what happens:

• If you keep full Option B coverage with no reduction, your premiums rise dramatically every five years.

• You have the option to reduce coverage by 50% or 75%, which phases in monthly after age 65.

• Electing full reduction means premiums stop at age 65, and coverage gradually phases down to 25% of the original amount.

Because Option B is paid entirely by you, many retirees find that continuing this coverage after age 65 without reduction becomes unaffordable unless there’s a strong financial need.

Option C: Emotional Security vs Financial Tradeoffs

Option C covers your spouse and dependent children. Like Option B, premiums go up in five-year bands and are paid in full by the enrollee.

If your children are grown or your spouse has alternative coverage or savings, continuing Option C may no longer make financial sense. It’s important to revisit whether this option still aligns with your current family and financial structure.

FEGLI Reduction Choices: What to Know Before Age 65

When you retire or reach age 65, you’ll need to make decisions about your reduction options:

• Basic: You can elect a 75% reduction (at no cost after age 65), a 50% reduction, or no reduction. No reduction and 50% reduction continue to require monthly premiums.

• Option A: Automatically reduces to $2,500 unless waived. Premiums stop at age 65.

• Option B & C: You choose full, 50%, or no reduction. Your choice determines how long you’ll pay premiums and how much coverage remains.

These decisions are permanent. You cannot increase coverage or undo your reduction choices later. Carefully balancing your need for insurance against the cost is essential.

How to Evaluate Your FEGLI Needs

Before deciding to continue or cancel FEGLI coverage in retirement, ask yourself:

• Do I still need life insurance? If your children are independent and your spouse is financially secure, you may not need as much coverage.

• Can I afford the premiums at older ages? Look ahead at the age-based premium charts to estimate costs through age 80 and beyond.

• Do I have other coverage options? You might have individual life insurance policies or other resources that reduce the need for FEGLI.

• Will my survivor need this benefit? If your FEGLI is your only life insurance, ensure that its continuation is part of your overall estate and survivor planning.

What Happens If You Cancel FEGLI?

You can cancel or reduce your FEGLI coverage at any time. However, regaining coverage later is nearly impossible unless there is a rare open season or a qualifying life event—and even then, evidence of insurability may be required.

If you cancel:

• You won’t be able to re-enroll easily.

• Your coverage ends permanently for that specific part of FEGLI.

• You could save money, but only if you no longer need that coverage.

This makes the timing and reason for cancellation a critical decision.

Considering Alternatives to FEGLI in Retirement

If the cost of continuing FEGLI becomes too high, it’s worth exploring other types of coverage to meet your needs:

• Permanent life insurance may offer level premiums and cash value accumulation, but comes at higher initial costs.

• Term life insurance might be more affordable in early retirement, but it typically expires before advanced age.

• TSP savings, survivor benefits, and annuities may reduce the need for ongoing life insurance altogether.

It’s not always necessary to replace FEGLI if your financial plan includes other reliable safety nets.

Coordination with Survivor Benefits

Don’t view FEGLI in isolation. It’s one part of your larger retirement and survivor strategy. If you’ve elected a survivor annuity, that income may already provide a cushion for your spouse.

You’ll want to consider:

• Whether your survivor can manage without life insurance proceeds

• How much debt, mortgage, or future expenses still remain

• The impact of health costs, especially long-term care

FEGLI can be a bridge, not a lifetime necessity. Once your financial obligations are settled, the value of maintaining full coverage declines.

Timing Your Decisions Carefully

You don’t have to wait until retirement to start evaluating your options. Here’s a smart timeline:

• At age 55: Review your FEGLI options and premium projections.

• Before age 60: Begin planning whether to reduce or cancel optional coverages.

• At retirement: Lock in your reduction elections.

• At age 65: Be ready for automatic changes to take effect based on your elections.

If you’ve already passed these milestones, it’s not too late to review your current elections and costs. Premiums don’t drop with age—they increase. Acting early gives you more control.

Making the Most of Your Retirement Budget

Your retirement income may come from your FERS or CSRS annuity, TSP withdrawals, and possibly Social Security. As your income becomes more fixed, every premium counts.

FEGLI costs can chip away at your disposable income if left unchecked. A careful review can help you:

• Prevent unnecessary spending on outdated coverage

• Redirect funds toward long-term care, travel, or other needs

• Support your spouse or heirs more effectively with the right mix of insurance and assets

Premium shock is common after 60—but avoidable if you take time now to plan.

Your Next Step: Review Before It Costs You More

You’ve spent years earning your government benefits. Don’t let rising FEGLI costs take a silent bite out of your retirement income.

Whether you’re five years from retirement or already collecting your annuity, now is the time to:

• Log into your Benefits portal and review your FEGLI elections

• Look up the current age-based premium tables

• Make sure your reduction options still reflect your goals

• Consider talking with a licensed professional about alternatives

An informed decision today can free up thousands in future premiums—without compromising your retirement peace of mind.

Get Clarity Before You Commit

Life insurance shouldn’t become a financial burden in retirement. Understanding how FEGLI works after age 60 helps you protect what you’ve earned while preserving what you still want to enjoy.

If you’re unsure whether to reduce or retain your FEGLI coverage, speak with a licensed professional listed on this website. You don’t need to make this decision alone. A second opinion can help turn a difficult choice into a confident one.