As you approach retirement from federal service, one of the most important financial questions to consider is whether to keep, reduce, or cancel your Federal Employees’ Group Life Insurance (FEGLI) coverage. At United Benefits, we specialize in helping federal employees make informed decisions about their benefit options before and after retirement. Below, our 2024 Federal Life Insurance review walks you through how FEGLI works, what changes after retirement, and how to evaluate whether maintaining your coverage is the right move for your financial future.
Understanding FEGLI Coverage
FEGLI, the Federal Employees’ Group Life Insurance program, is one of the largest group life insurance arrangements in the world, covering over four million federal employees and retirees. It’s administered by the Office of Personnel Management (OPM) and underwritten by MetLife. The program consists of several parts:
- Basic Coverage – Automatically provided to eligible federal employees, equal to your annual base pay rounded up to the next $1,000, plus $2,000.
- Option A – Standard $10,000 of additional coverage.
- Option B – Multiple of your annual salary (up to five times) for higher coverage amounts.
- Option C – Coverage for eligible family members (spouse and dependent children).
FEGLI premiums are typically deducted from your paycheck while employed. However, one of the biggest changes occurs when you retire—your premiums stop being payroll-deducted, and you must choose what to do with your existing coverage.
FEGLI After Retirement: What Changes?
At retirement, eligible employees can choose to continue their FEGLI Basic and Optional coverage. To keep it, three requirements must be met:
- You were enrolled in the coverage for the five years immediately preceding retirement (or since first eligible).
- You’re entitled to an immediate annuity.
- You elect to continue your coverage.
The key difference after retirement is cost. Once you’re no longer an active employee, your premium rates often increase significantly, especially for Optional Coverages B and C. According to OPM rate tables, FEGLI premiums for retirees can rise by 150–200% across certain age brackets, and continue to increase in five-year intervals as you age. This can lead many retirees to reconsider whether continuing their FEGLI is financially sustainable.
Your Three Choices: Keep, Reduce, or Let It Go
When you retire, you have three main options for your FEGLI coverage:
1. Keep Your Full Coverage
Keeping your full FEGLI Basic and Optional coverage allows your beneficiaries to receive the largest benefit. However, the trade-off is higher premiums, particularly for Option B multiples. Keeping full coverage is often best for retirees who still have significant financial obligations—for example, if they are supporting dependents, paying off a mortgage, or have other debts that would impact their family’s financial security.
2. Reduce Your FEGLI Coverage Over Time
One popular option is to reduce your Basic coverage gradually. The “75% Reduction” option, for instance, reduces your Basic Insurance Amount by 2% per month after age 65 (or retirement, if later), until it reaches 25% of its original value. The best part? There’s no premium cost for Basic coverage after the reduction phase is complete. This can strike a balance between continuing coverage and managing retirement income effectively.
3. Cancel or Replace FEGLI
In many cases, retirees explore private life insurance alternatives that can lock in premiums and coverage levels for life. FEGLI’s rising premiums and limited flexibility can make private policies more attractive, especially if your health allows you to secure competitive rates. Exploring life insurance options through United Benefits can help identify whether a replacement policy better fits your post-retirement financial goals.
Pros and Cons of Keeping FEGLI After Retirement
Every retiree’s situation is unique, but there are general advantages and disadvantages worth weighing:
Pros
- No medical exam required – Retirees automatically qualify to keep their FEGLI if eligibility requirements are met.
- Guaranteed coverage – FEGLI provides peace of mind even if health issues prevent new private insurance.
- Basic option affordability (75% reduction) – Eventually becomes cost-free after reduction.
Cons
- Rising premiums for Options B and C – Rates increase with age, significantly reducing retirement cash flow.
- Limited customization – You can’t change coverage amounts or beneficiaries easily beyond set options.
- Potential overpayment – You may end up paying more in premiums than the value of the benefit if you live long into retirement.
FEGLI vs. Private Life Insurance: A Cost Comparison
The most common reason retirees consider alternatives to FEGLI is cost. For example, according to data from the Office of Personnel Management, the monthly cost of one multiple of Option B coverage (equal to one year’s salary) increases from approximately $0.065 per $1,000 of coverage for a 50-year-old to over $2.60 for a 75-year-old retiree. Over decades, that can mean thousands of dollars more in cumulative premiums.
Private life insurance policies—such as term or whole life plans—often offer fixed premiums, guaranteed death benefits, and policy customization. While private policies typically require medical underwriting, retirees in good health can often obtain long-term coverage for less than escalating FEGLI costs. Consulting with a benefits specialist can help determine whether a private policy makes more financial sense in your specific case.
Important FEGLI Statistics and Recent Trends
According to the U.S. Office of Personnel Management, more than 75% of federal retirees choose to keep at least their Basic FEGLI coverage into retirement, though fewer than 20% maintain full Optional coverage due to rising costs. Additionally, in 2024, there is a continued trend of federal retirees transitioning to hybrid retirement insurance strategies—maintaining reduced FEGLI for minimal cost and supplementing coverage through private insurance plans.
A Government Accountability Office report on federal employee benefits noted that post-retirement premium increases remain one of the top reasons retirees seek alternative policies. As financial pressures during retirement continue to rise, a holistic benefits analysis becomes increasingly valuable.
Expert Help from United Benefits
At United Benefits, our team of federal benefits experts has decades of experience helping employees and retirees navigate complex decisions about FEGLI and life insurance coverage. We understand how each part of your federal benefits package—from annuities to survivor benefits—affects this decision. Through a personalized review, we help determine whether keeping your FEGLI, reducing coverage, or transitioning to a private policy best supports your long-term financial goals.
Talk to a United Benefits Specialist
If you’re unsure which FEGLI path fits your retirement plan, contact our team today at 866-558-2121 or visit our Life Insurance page for more information. You can also reach us by mail at 3295 County Road 47, Florence, AL 35630.
The Bottom Line
Your decision about FEGLI after retirement should align with your broader financial and family goals. While FEGLI offers guaranteed coverage and long-standing stability, its rising costs and limited flexibility make evaluating other options essential. Whether you choose to keep, reduce, or let it go, using expert guidance from United Benefits ensures that your life insurance strategy is both financially smart and personally meaningful—helping you retire with confidence and peace of mind.