The Federal Employees’ Group Life Insurance (FEGLI) helps protect Feds and their families in the event of a worst-case scenario.
While such coverage requires little from your paycheck while you’re young, things change as you move toward and beyond retirement. The question is whether FEGLI aligns with your post-retirement strategy.
Answering this question requires an understanding of FEGLI coverage, the costs to maintain it, and what, exactly, you want from the coverage.
A FEGLI Discussion
FEGLI Basic is available to most Feds, providing an immediate death benefit equal to your annual salary plus $2,000. As of this writing, the cost for this benefit is $.16 every two weeks for each $1,000 of coverage, while the government pays the rest.
Federal employees age 45 and younger may also qualify for the FEGLI Basic Extra Benefit, which increases the death benefit at no additional cost.
Things change if you add FEGLI options to your coverage. In that case, you pay 100% of the premiums for the following:
- Option A: Standard. Provides you with $10,000 of additional coverage, increasing your bi-weekly premiums from $.20 to $6.00, depending on age.
- Option B: Additional. Provides additional coverage equal to one, two, three, four or five times (multiples) of your annual basic pay. Bi-weekly premium costs range from $0.02 to $2.64.
- Option C: Family. Pays out $5,000 to your spouse and $2,500 per eligible child, per selected multiple. Bi-weekly premiums range from $0.22 to $7.20.
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Should I Keep FEGLI in Retirement?
FEGLI Options B or C premiums increase with age. Option B increases can range from $0.217 to $6.24 per $1,000 of coverage per month. Option C can cost from $1.80 to $16.90 per multiple per month.
FEGLI Basic is a little different, giving you the options of reduction or no reduction:
- A 75% reduction decreases coverage by 2% per month starting at age 65 until it reaches 25% of the original amount and no premiums are required.
- A 50% reduction reduces coverage by 1% per month at age 65, until it reaches 50% of the original amount. In this case, you continue paying the extra premium.
- No reduction is the costliest. While your coverage remains the same, you’ll pay for premiums for the rest of your life. As mentioned above, those premiums drastically increase with age.
FEGLI Versus Private Life Insurance
Private life insurance could be more affordable than keeping your FEGLI coverage in retirement.
But be sure to secure replacement insurance before dropping FEGLI. Also, consider the following:
- Determine the coverage purpose, the amount needed, and the duration. If your adult children are independent, you might not need as much.
- Compare benefits, rather than premiums. Lower premiums might be enticing, but they’re worthless if the insurance leaves you short on coverage.
- Be honest about health issues. Pre-existing conditions or life-threatening illnesses may result in higher life insurance premiums from private carriers, making FEGLI a more attractive option.
Determining Your FEGLI Steps
Maintaining FEGLI after you separate from service can be expensive. However, if you have a pre-existing condition, a life-threatening disease, or don’t want to undergo medical exams to qualify for private insurance, FEGLI might be a viable choice.
Before deciding, weigh your life and financial situations and why you need the coverage. For additional assistance, reach out to the Fed-focused CERTIFIED FINANCIAL PLANNERS© at Serving Those You Serve. These experts can help you evaluate your options and determine what makes the most sense for your situation.
To set up a no-obligation appointment, visit the website or email [email protected].
The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Serving Those Who Serve writers and not necessarily those of RJFS or Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy suggested. Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment or financial decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. **
