FEGLI in Retirement: Here’s the One Thing to Avoid for Federal Employees
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The Federal Employee Group Life Insurance (FEGLI) program is the largest group plan in the world, consisting of over 4 million federal workers and retirees. It is comprised of four components: Basic coverage, and then 3 optional types of coverage titled “A,” “B,” and “C.” You need basic coverage to get any or all of the additional coverage choices, so it may help to think of FEGLI like a tree with “Basic” being the trunk while A, B, and C are branches. Nonetheless, all four options contain a number of facets to consider upon retirement from Federal service. With FEGLI-Basic, you have three routes to pick from: drop coverage completely, keep full coverage, or reduce coverage. Keeping full coverage can become considerably expensive, but if you are suffering from a life-threatening illness, maintaining FEGLI-Basic probably makes a ton of sense. As for reducing it, FEGLI coverage can be cut by 50% for a cheaper price, or slashed by 75%.
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If you’re 65 or older, retired, and held the coverage for at least 5 years, though, the remaining 25% of coverage stays in place at no cost. An argument can be made that the coverage was paid for in the decades of federal employment, but the point is that there is no further money due and you keep some life insurance. If you haven’t caught the no-brainer yet, here it is: No one should irrevocably drop FEGLI-Basic in retirement. Why get rid of it completely when you can keep 25% at no cost? For those retiring prior to reaching age 65, paying for FEGLI until you get there is the only foreseeable deterrent when it comes to keeping “Basic.” As for the additional coverage choices, there are other things to keep an eye out for, but none as obvious as holding on to at least 25% of your Basic FEGLI in retirement.
Until Next Time,
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**Written by Benjamin Derge, Financial Planner. 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 Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.
