Many federal employees treat the Federal Employees’ Group Life Insurance (FEGLI) program as a “set it and forget it” benefit. Early in your career, that approach works because premiums stay relatively low. After age 55, however, the cost curve changes quickly.
This question comes up often with Feds approaching retirement: how much life insurance do you really need? The goal is simple — avoid paying more than necessary for coverage you may no longer need.
The FEGLI Cost Curve
FEGLI Option B, known as additional insurance, often surprises Feds as they move past age 55. The coverage is one to five times your salary, so the more multiples you carry, the higher the premium grows over time.
The real issue comes from the age bands. As you move into the next bracket, the monthly deduction can increase quickly. Because premiums are deducted automatically from payroll, many employees do not notice the change right away.
The Office of Personnel Management (OPM) posts the full FEGLI premium schedule online. When Feds review the chart, the jump between age bands usually stands out right away. Looking ahead to the next one or two brackets often changes how people think about keeping multiple Option B elections.
Some Feds wait until the next premium jump shows up on their pay statement before reviewing coverage. That timing often forces a rushed decision instead of a thoughtful comparison.
Start With the Real Question: Do You Still Need Life Insurance?
Before comparing policies, take a step back and reassess the coverage's purpose.
Earlier in your career, life insurance often protected a young family or replaced income. After age 55, the situation often looks different.
Many Feds now have adult children, a smaller mortgage, and growing savings in the Thrift Savings Plan (TSP). A Federal Employees Retirement System (FERS) pension and Social Security may already support a surviving spouse.
Common remaining needs can include:
- Final expenses
- Income support for a spouse
- Mortgage payoff
- Legacy or charitable planning goals
Some employees keep the same coverage levels they elected years earlier “just in case,” even though their financial picture has changed. Recalculating survivor needs often shows that less coverage may be necessary.
If those needs have changed, your coverage may need adjustment.
Learn more about your retirement benefits at our No-Cost webinars, featuring Ed Zurndorfer -
FEGLI vs, Private Term: What You Are Actually Comparing
When Feds start reviewing life insurance after 55, the conversation usually turns to cost. Much of the discussion around FEGLI vs. private life insurance after 55 starts there.
Premiums come out through payroll, and the coverage continues without medical underwriting. Many federal employees keep it for that reason alone.
Private term insurance works differently. A new policy requires underwriting. Healthy applicants may qualify for lower premiums, and the coverage amount does not have to be based on a salary multiple. You choose the amount and the policy length.
That difference matters. Private insurance can cost less for some Feds. FEGLI remains easier to keep because the coverage already exists.
A Simple Cost Comparison Method
Good federal employee life insurance retirement planning usually starts with a straightforward cost comparison that looks beyond today’s premium.
Use this four-step process:
- Step 1:Review your current FEGLI elections. Confirm your Basic coverage and any Option B multiples.
- Step 2:Check the OPM premium chart to estimate costs in your current age band and the next two bands.
- Step 3:Request comparable private term quotes with the same benefit amount and duration.
- Step 4:Compare the total cost over the next five to ten years rather than focusing only on the first month’s premium.
This comparison often clarifies the FEGLI vs. private life insurance after 55 decision and shows where private coverage may lower long-term costs.
Transition Planning: Avoiding a Coverage Gap
One common mistake is canceling FEGLI before replacement coverage becomes active.
According to OPM, federal employees can reduce or cancel FEGLI at any time without waiting for an open season. Before making changes, confirm that any replacement coverage has been approved and placed in force, because private insurance underwriting can take time.
When federal employees retire, they choose how many Option B multiples to retain and whether those multiples will be reduced over time. Some Feds secure private term life insurance first, then gradually reduce the number of Option B multiples as part of their retirement planning.
Keep beneficiary designations up to date on every policy.
When Keeping FEGLI Still Makes Sense
For some Feds, keeping FEGLI remains the right decision.
Health concerns may make private underwriting expensive or unavailable. Some employees only need modest coverage and prefer the convenience of payroll deductions.
Many Feds still keep their Basic FEGLI and elect the 75 percent reduction in retirement. The reason is straightforward. Coverage stays at the full amount until age 65. At that point, the premiums stop, and the benefit gradually declines to 25% of the original amount.
That remaining coverage can stay in place for the rest of your life without additional premiums. For many federal retirees, that smaller benefit still handles final expenses.
Reassessing Coverage After 55
Life insurance decisions often shift as retirement approaches. After age 55, reassess coverage needs and compare long-term costs.
FEGLI may still fit your situation. In other cases, resizing coverage or adding private term insurance may reduce long-term expenses while maintaining protection.
If you want help reviewing your coverage strategy, reach out to the Serving Those Who Serve team at [email protected]. A thoughtful review today can help prevent expensive surprises later.
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. **
