FEGLI After Retirement: Costs, Reduction Options, and What to Keep

Carrying FEGLI Into Retirement

To keep Federal Employees' Group Life Insurance into retirement, you need to have been continuously enrolled in FEGLI for the five years immediately preceding your annuity starting date (or from your earliest opportunity to enroll, if that's less than five years). The coverage options you had as an active employee — Basic, Option A (Standard), Option B (Additional), and Option C (Family) — carry over, but the cost structure shifts dramatically once you stop receiving a federal paycheck.

FEGLI Basic: The Free-at-65 Option

Basic FEGLI coverage equals your annual salary rounded up to the next $1,000, plus $2,000. As an active employee, you pay $0.1600 per biweekly pay period per $1,000 of coverage (the government covers one-third). In retirement, the regular premium is $0.3467 per month per $1,000 until age 65 — but the real cost question is the reduction election you make on SF 2818 at retirement. If you choose 50% or no reduction, you can later change to 75% reduction, but not back to a richer option.

75% reduction. Coverage decreases by 2% of the pre-retirement face value per month starting at age 65 (or retirement date, if later). After about three years and two months, coverage bottoms out at 25% of the original amount. The upside: you stop paying any premium at age 65. This is the most popular election for retirees who want some residual coverage without the ongoing cost.

50% reduction. Coverage decreases by 1% per month until it reaches 50% of the original amount. You continue paying an extra premium of $0.75 per month per $1,000 of post-reduction coverage after age 65 — indefinitely.

No reduction. Coverage stays at 100% of the pre-retirement face value. The premium after age 65 is $2.25 per month per $1,000 of coverage. On a $100,000 Basic amount, that's $225 per month — a cost that rises as you age because the coverage amount doesn't decrease to offset it.

Option A (Standard): $10,000 Flat

Option A provides a flat $10,000 death benefit. In retirement, it reduces by 2% per month starting at age 65 until it reaches 25% ($2,500). Once the reduction begins, the premium stops; after the reduction completes, the remaining $2,500 coverage is free.

Option B (Additional): Where Costs Climb Fast

Option B is where FEGLI costs can quietly erode your retirement cash flow. You choose 1 to 5 multiples of your salary, and premiums are based on five-year age bands. As an active employee, the cost already escalates at 55. In retirement, the age-band jumps continue:

• Ages 55–59: $0.390 per month per $1,000 of coverage
• Ages 60–64: $0.867 per month per $1,000
• Ages 65–69: $1.040 per month per $1,000
• Ages 70–74: $1.863 per month per $1,000

On a $90,000 salary with 3× Option B coverage ($270,000), monthly premiums jump from $105 at age 58 to $234 at age 61 to $503 at age 71. Unlike Basic, Option B lets you elect Full Reduction or No Reduction for each multiple. With Full Reduction, coverage decreases by 2% of the pre-retirement amount per month starting at age 65 (or retirement date, if later) until it reaches zero after 50 months, and premiums stop when the reduction begins. With No Reduction, you pay the age-banded rate for as long as you keep it.

Many retirees drop Option B at or before 65 because the cost-per-dollar-of-coverage becomes unfavorable compared to private term life insurance. If your dependents no longer rely on the income replacement, the coverage may not be worth what it costs.

Option C (Family): Dependents

Option C covers your spouse ($5,000 per multiple) and eligible children ($2,500 per multiple), with up to 5 multiples. The premium structure follows the same age-band pattern as Option B, based on your age (not your dependents'). Option C offers Full Reduction or No Reduction. With Full Reduction, coverage decreases by 2% per month starting at age 65 (or retirement date, if later) until it reaches zero after 50 months, and premiums stop when the reduction begins; with No Reduction, coverage stays in force and the age-banded premium continues.

The Reduction Election Has Limited Flexibility

You make the Basic reduction election once — on SF 2818 at retirement. Retirees who elect no reduction for Basic often underestimate how the $2.25-per-$1,000 monthly premium compounds over decades. At the same time, retirees who elect 75% reduction sometimes wish they'd kept more coverage when a spouse's health situation changes.

The decision depends on your other life insurance, your spouse's financial needs if you die, and whether the premium fits your retirement budget over a 20- to 30-year horizon.

Connecting Insurance to Retirement Timing

Your FEGLI eligibility in retirement ties directly to the retirement pathway you choose. Immediate retirees and postponed retirees keep their FEGLI rights if they meet the five-year rule; for postponed retirees, coverage reinstates when the annuity begins. Deferred retirees — those who separate before reaching their MRA — permanently forfeit FEGLI coverage.

The FERS Retirement Eligibility & Timing Guide includes a FEGLI premium projection worksheet that maps your current coverage against the age-band cost schedule, so you can model the real expense before making the Basic reduction election on SF 2818.

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