FEGLI Gets Expensive as You Age—But This One Decision Could Keep You from Overpaying Later

Key Takeaways

• FEGLI premiums rise sharply with age, especially after retirement. If you’re keeping full coverage, expect higher costs in your 60s, 70s, and beyond.

• You can avoid overpaying by making a single well-timed election at retirement to reduce or cancel optional coverage.

Why FEGLI Starts to Strain Your Budget Later in Life

The Federal Employees’ Group Life Insurance (FEGLI) program is widely used by public sector employees throughout their careers. While it offers valuable protection, especially in your working years, it can become an increasingly costly benefit as you age.

The real issue with FEGLI starts to show after retirement. Once you’re no longer a full-time employee, the cost of maintaining coverage—especially the optional parts—increases dramatically. Many retirees are caught off guard when they see their monthly premium deductions shoot up after age 60, then spike again at 65, 70, 75, and beyond.

Understanding FEGLI Coverage Options

Before you make any decisions, it’s important to understand what FEGLI offers and how it evolves over time:

• Basic Coverage: Automatically included unless waived. It equals your annual pay (rounded up to the next $1,000) plus $2,000.

• Option A (Standard): Adds $10,000 in coverage.

• Option B (Additional): Lets you choose 1 to 5 multiples of your salary.

• Option C (Family): Covers eligible family members in multiples of $5,000 (spouse) and $2,500 (children).

While Basic coverage is partially subsidized and remains affordable into retirement if you choose a reduced benefit option, Options A, B, and C can become prohibitively expensive.

What Happens at Retirement

When you retire, you must make a decision about how your FEGLI coverage continues. For each part of the coverage, you can choose one of the following:

• Continue full coverage and pay full premiums.

• Elect a 50 percent reduction (available only for Basic and Option B).

• Elect a 75 percent reduction (only for Basic and Option B).

• Cancel the optional coverage entirely.

This election is a one-time opportunity. Once made, your choice is permanent, and it determines both your future premiums and your future benefit amount.

FEGLI Premiums by Age: A Quick Overview

For retirees who keep full Option B or Option C coverage, premiums are calculated in five-year age bands and escalate sharply:

• From age 55 to 59, premiums double compared to age 50 to 54.

• From age 60 to 64, they double again.

• At age 65, coverage becomes free if you chose the 75 percent reduction. But if you chose no reduction, you’ll continue paying, and rates climb higher in every subsequent age band.

This means that a retiree in their 70s or 80s can end up paying hundreds of dollars each month to maintain optional life insurance.

How the 75 Percent Reduction Saves You Money

One key decision you can make to prevent overpaying is electing the 75 percent reduction option for Basic and Option B coverage.

Here’s how it works:

• You continue paying reduced premiums until age 65.

• After 65 (or retirement if later), your premiums stop completely.

• Your insurance benefit reduces by 2 percent each month until it reaches 25 percent of the original value.

While your coverage amount shrinks, you benefit from zero premiums after 65, which often results in significant long-term savings.

For those who do not expect to need the full payout later in life, this option provides a smart balance between continued coverage and cost control.

Why Many Retirees Regret Keeping Full Option B

One of the most common regrets among public sector retirees is holding on to full Option B coverage.

At retirement, many feel they still need the extra protection for their spouse or estate. But what they don’t always account for is how steep the premiums become, especially after 65.

If you’re in good health and have other financial resources, continuing full Option B may not make financial sense. Many retirees find themselves cancelling it later—but by then, they’ve already overpaid for years.

When to Reassess Your Life Insurance Needs

You should consider reassessing your FEGLI needs when you:

• Near retirement or become eligible for an immediate annuity.

• Pay off your mortgage or other major debts.

• Become eligible for Social Security or pension benefits.

• See a shift in your family or estate planning goals.

Ask yourself whether your family would need this coverage in 10 or 20 years. If not, reducing your coverage today might be the right move.

Life Insurance Alternatives in Retirement

If you still feel the need for life insurance in retirement, there are alternatives to FEGLI. These include:

• Permanent life insurance policies with level premiums.

• Term policies purchased privately.

• Burial insurance or final expense policies.

While FEGLI can be difficult to match in price during your working years, private alternatives may be more predictable and affordable later in life. Just remember, private insurance generally requires underwriting, and premiums vary based on your health and age at purchase.

If you’re considering switching, it’s best to compare options well before retirement or while you’re still in good health.

What You Should Do Before Your FEGLI Election

As retirement nears, prepare to make an informed FEGLI decision by:

• Reviewing your most recent FEGLI coverage and cost breakdown.

• Asking your HR or retirement office for an estimate of post-retirement FEGLI premiums.

• Thinking through your life insurance needs over the next 10 to 30 years.

• Discussing options with a licensed professional listed on this website.

Make sure your FEGLI election reflects your goals—not just habit or fear of not having enough coverage.

Timing Matters: Don’t Wait Until You’re 65

It’s important not to delay your decision until premiums become unaffordable. By the time you hit age 65, you’ve likely already committed to your FEGLI reduction elections.

That means the best time to evaluate your needs and adjust coverage is right before you retire—not afterward.

FEGLI decisions at retirement are final. There are no open seasons for retirees to reenroll or adjust coverage later. This is why careful planning during your last year of service is essential.

Spousal and Survivor Considerations

Another factor to weigh is how your FEGLI decision affects your spouse or other beneficiaries.

• If you’ve elected a survivor annuity, your spouse will continue receiving part of your pension.

• FEGLI may not be as critical if other benefits (TSP, pension, Social Security) offer financial stability.

• Family Option C becomes less relevant if your children are now adults and financially independent.

Retirees often over-insure without revisiting whether their dependents still require that safety net.

What About Keeping Basic Only?

Many retirees opt to keep just Basic FEGLI coverage with the 75 percent reduction.

This is often the most affordable long-term route, since premiums stop at 65 and you retain a modest death benefit. It keeps some protection in place without dragging down your monthly retirement budget.

Basic coverage also continues automatically unless you cancel it. But you can still choose your reduction level at retirement, which affects how much benefit stays in force.

The Role of Health and Longevity in the Decision

If you’re in poor health and worry about qualifying for private coverage, it might make sense to keep more FEGLI.

On the other hand, if you’re healthy, financially secure, and have minimal debt, you may not need full optional coverage anymore. The sooner you adjust, the more you save.

Health also plays a role in considering how long you’ll realistically need life insurance protection. Some retirees drop their coverage too late to see the real savings.

Staying Ahead of the FEGLI Curve

Many public sector retirees make last-minute or emotionally driven FEGLI choices that affect their financial health for decades. Being proactive is the difference between controlled, intentional planning and scrambling to cut costs later in life.

You only get one chance to make your FEGLI retirement election. Don’t waste it.

Your Next Steps Toward Smarter Coverage Choices

FEGLI is one of the few benefits that becomes more expensive as you get older, not less. That’s why making a smart choice at the retirement point is key to protecting both your financial and emotional well-being.

Don’t wait for your premiums to balloon unexpectedly. Review your needs now, talk with a licensed professional listed on this website, and ensure your life insurance works for you—not against you—in retirement.