One of the most common retirement problems federal employees face is assuming their Federal Employees’ Group Life Insurance (FEGLI) will carry into retirement the same way it exists while they are still working. It usually does not. Some coverage can continue, some coverage shrinks, some premiums change in a big way, and some benefits end when employment ends. The Office of Personnel Management (OPM) also states that when an eligible retiree does not make a FEGLI election, the default is to continue eligible coverage with the maximum reduction option available for each type.
Retirement is where the FEGLI decisions finally appear. You need to know what you have, whether you can keep it, what it will cost later, and whether it still matches the job you want life insurance to do. That sounds simple. In practice, this is where rushed decisions happen.
FEGLI at Retirement
What may continue, what could reduce at 65, and what ends when employment ends. Tap each coverage type to see the details.
Basic Coverage
Annual pay rounded up to next $1,000 + $2,000Three reduction options at retirement: 75% Reduction (free after 65), 50% Reduction, or No Reduction (highest ongoing cost). Extra coverage for employees under 45 ends at retirement. Required to keep any Optional coverage.
Option A
Flat $10,000 additional coverageReduces automatically by 2% per month starting the second month after age 65, down to $2,500. There is no No Reduction election for Option A. Cost after full reduction is $0.
Option B
1 to 5 multiples of annual payEach multiple can be elected separately. Full Reduction means coverage eventually reaches $0. No Reduction keeps coverage level, but monthly premiums may increase significantly at ages 70, 75, and 80+. This is often the coverage type that deserves the closest review before retirement.
Option C
Family coverage on spouse and eligible childrenThis is not a death benefit for your surviving family. Option C pays the employee if an eligible family member passes away. Full Reduction and No Reduction work the same way as Option B. Cannot be assigned to another party.
Start by confirming what you actually have
FEGLI has two main layers: Basic and Optional. Basic coverage is your annual basic pay rounded up to the next $1,000, plus $2,000, with a $10,000 minimum. Optional coverage includes Option A, a flat $10,000; Option B, one to five multiples of annual basic pay; and Option C, family coverage on your spouse and eligible dependent children.
Additionally, Option C is not a death benefit paid to your family when you die. It pays you if an eligible family member dies. FEGLI is also group term life insurance, which means it does not build cash value or paid-up value.
That’s important because before you review a single premium, you need to ask what problem this coverage is supposed to solve. Is it there to replace income for a surviving spouse? Cover a mortgage? Protect a child who still depends on you? Handle final expenses? Or is it coverage you elected years ago for a situation that no longer exists?
OPM’s March 2026 guide for retiring employees says you can confirm your FEGLI coverage by reviewing your SF 2817 life insurance elections, checking box 27 on your SF 50, looking through your electronic Official Personnel Folder, or working with your HR office. Before retirement, “I think I have five multiples” probably isn’t good enough. You want the paper trail.
The Four Layers of FEGLI
FEGLI coverage is built in layers. Each type has a different structure, different cost rules, and a different job. Here is what each one looks like.
Basic Insurance
The foundation of FEGLI. Automatically provided to most federal employees unless waived. Government pays one-third of the premium while you are employed.
Annual basic pay rounded up to next $1,000, plus $2,000 ($10,000 minimum)
Standard Optional
A flat supplemental amount. Employee pays 100% of the premium. Reduces automatically after 65 with no election available to prevent the reduction.
Flat $10,000 (reduces to $2,500 after age 65)
Additional Optional
Multiples of your annual pay for higher coverage. Employee pays 100%. Premiums can increase significantly with age if No Reduction is elected at retirement.
1, 2, 3, 4, or 5 multiples of annual basic pay
Family Optional
Covers your spouse and eligible dependent children. Employee pays 100%. The benefit is paid to you if a covered family member passes away.
1 to 5 multiples ($5,000/spouse and $2,500/child per multiple)
Option C is not a survivor benefit on your life
A common misunderstanding is that Option C protects your family if you pass away. It does not. Option C pays you, the insured employee, if an eligible family member dies. It is family coverage on your spouse and eligible dependent children, not a death benefit for them. If your goal is to protect a surviving spouse from an income gap, Option C is not designed for that purpose.
Make sure you are eligible to carry FEGLI into retirement
Not every federal employee can keep every piece of FEGLI in retirement. OPM says eligibility generally requires retiring on an immediate annuity, being enrolled on the date of retirement, meeting the five-year/all opportunity rule, and not converting the coverage to an individual private policy beforehand. The five-year/all opportunity rule applies separately to Basic and to each Optional type. OPM also makes clear that you must continue Basic in order to continue Option A, Option B, or Option C.
That separate-by-coverage rule is easy to overlook. A federal employee might be eligible to keep Basic, but not eligible to carry one of the Optional coverages into retirement if the timing doesn’t line up, so this is one reason FEGLI should be reviewed months before retirement, not when the forms are already on the desk.
There is no exception to the continuation rules. If you are not eligible to carry FEGLI into retirement, you may have the option to convert the coverage to an individual policy without a medical exam. That is not the same as keeping FEGLI. It becomes a separate, direct-pay private policy, and the pricing can look very different once you are no longer part of the group plan.
A good review here is straightforward: confirm what coverage you have now, confirm how long you have had each piece, and confirm that your retirement date will satisfy the rules. It is not glamorous work, but it is exactly the kind of detail that prevents a last-minute retirement surprise.
FEGLI Continuation Eligibility
Immediate annuity
Retiring on an immediate, not deferred, annuity
Enrolled on retirement date
Coverage must be active the day you retire
5 years or all opportunity
Enrolled for the last 5 years, or since first eligible if less
No prior conversion
Coverage was not already converted to an individual policy
Basic required for Optional
You must continue Basic to keep Option A, B, or C
Review the need, not just the coverage amount
A lot can change by the time retirement arrives. Your mortgage may be smaller. Your children may be grown. Your spouse may have income of their own. Your TSP balance may be in a stronger position than it was ten or fifteen years ago. Or the opposite may be true: you may still have a real survivor-income gap that needs attention. The point is that life insurance should be tied to an actual risk, not to an old election that has never been revisited.
Option C provides family coverage on a spouse and eligible dependent children. Each multiple equals $5,000 for a spouse and $2,500 for each eligible child, and the benefit is paid to you if that covered family member passes away. Eligible family members include a spouse, including a valid common law marriage, and unmarried dependent children under age 22, or older children who are incapable of self-support due to a disability that began before age 22. The cost stays the same no matter how many eligible dependent children you have.
Be aware, though, that Option C is not a replacement for life insurance on your own life. It doesn’t protect your spouse or family if you pass away. Second, it needs to be revisited any time your family situation changes. If you are divorced, separated, or your children are no longer eligible, the coverage may not work the way you might be expecting.
This is the broader planning question behind FEGLI: what exactly are you trying to protect in retirement? A benefit can be valuable and still be the wrong tool for the job. Coverage decisions make more sense when they are tied to cash-flow needs, survivor needs, and the rest of the household balance sheet.
What Job Is Your FEGLI Supposed to Do?
Survivor Income
Replace your pension or paycheck for a surviving spouse
Basic + Option BDebt Payoff
Mortgage, loans, or other obligations that remain
Option BFinal Expenses
Burial costs, medical bills, estate settlement
BasicDependent Child
Financial support for a child who still depends on you
Basic + Option BWhere does Option C fit? None of the above. Option C pays you if a covered family member passes away. It may help with lost household income or expenses tied to that loss, but it does not protect your family if something happens to you.
Understand what changes at age 65 and what it can cost
This is the section many federal employees skip until the last minute, and it is usually the most important one. OPM says Basic has three retirement choices: 75% Reduction, 50% Reduction, and No Reduction.
Option A has an automatic 75% reduction, and there is no no-reduction election for Option A. Option B and Option C allow Full Reduction or No Reduction for each eligible multiple. The reductions begin the second month after age 65, or the second month after retirement if you retire after 65.
With Basic coverage, you’re choosing how much of it you want to keep later on:
- If you pick 75% Reduction, most of your coverage slowly disappears, and you’re left with about 25% of what you started with.
- If you pick 50% Reduction, you keep half.
- If you pick No Reduction, your full amount stays the same.
Option A is simple; it just shrinks over time until it bottoms out at $2,500, no choices to make there.
What can be confusing are Options B and C, because they don’t behave like Basic at all.
- If you choose Full Reduction, the coverage slowly declines every month until it’s completely gone.
- If you choose No Reduction, the coverage stays in place, but you’ll keep paying for it, and the cost goes up as you get older.
That last point is the key:
What FEGLI Could Cost After 65
Premiums vary by coverage type and reduction election. These are the current OPM annuitant rates for coverage carried into retirement.
Using OPM’s current annuitant schedule, $100,000 of Option B with No Reduction works out to about $104 per month at ages 65–69, about $186.30 at 70–74, about $390 at 75–79, and about $624 at age 80 and over.
That does not mean No Reduction is wrong. It means the choice should be intentional. Therefore, the real question is not just, “Do I want the coverage?” It is also, “Will I still want to pay for the coverage later?”
Unfortunately, once you receive your first regular annuity payment, changes are restricted. You can cancel or decrease coverage later, but you cannot increase it again, and any cancellation or reduction is permanent. That puts more pressure on getting the initial review right.
Clean up the paperwork before you separate
The FEGLI decision isn’t just what you choose. You also need to make sure the paperwork reflects what you intend. Retirees use SF 2818, Continuation of Life Insurance Coverage as an Annuitant or Compensationer, to make the retirement FEGLI election. The form can’t have scratch-outs, cross-outs, white-outs, overwritten numbers or letters, or digital edits. If you’re continuing Option B or Option C into retirement, don’t leave a reduction line blank.
There’s another practical point: don’t use SF 2817 to cancel FEGLI in retirement. Retirement FEGLI elections are handled on SF 2818. If you cancel FEGLI in retirement, you can’t later reenroll.
Beneficiary review belongs in the same conversation. You don’t have to file a designation if you’re satisfied with FEGLI’s statutory order of precedence. But if you want benefits paid differently, you need a Designation of Beneficiary form, SF 2823.
If there is no valid designation of beneficiary, assignment, or court order on file, FEGLI benefits are generally paid in this order: to your widow or widower, then your children, then your parents, then the executor or administrator of your estate, and then your next of kin under state law.
Assignment is separate, and it’s a much bigger move than many people realize. Assigning FEGLI permanently transfers ownership of your assignable FEGLI coverage to another person, firm, or trust, and the assignment is irrevocable. Option C cannot be assigned. Don’t use the assignment form if all you want to do is name a beneficiary. Those are two very different actions with very different consequences.
FEGLI Retirement Paperwork Checklist
Tap each item as you confirm it. These are the forms and records that may need to be reviewed before your retirement date.
Continuation of Life Insurance Election
The form used to make your FEGLI retirement election. No scratch-outs, white-outs, or digital edits allowed.
SF 2818Designation of Beneficiary
Only needed if you want benefits paid outside of FEGLI's statutory order of precedence.
SF 2823Electronic Official Personnel Folder
Confirm your current FEGLI enrollment and election history are documented here.
eOPFNotification of Personnel Action
Box 27 shows your current FEGLI coverage code. Verify it matches what you believe you have.
SF 50, Box 27Life Insurance Election History
Review past elections to confirm you meet the 5-year/all opportunity rule for each coverage type.
SF 2817 HistoryBeneficiary Designation
- Names who receives the benefit
- Can be changed at any time
- You keep ownership of coverage
- Filed on SF 2823
Assignment
- Permanently transfers ownership
- Irrevocable once completed
- Option C cannot be assigned
- Very different from naming a beneficiary
“Should I keep FEGLI or replace it?”
FEGLI can still make sense in retirement, but only in specific situations. Basic coverage with a reduction option often works when the goal is final expenses or a small buffer for a surviving spouse, especially if there’s already a pension and TSP covering income needs. On the other hand, Option B tends to become the pressure point. If the original reason for that extra multiple, like income replacement during working years, is no longer there, the rising cost in retirement can outweigh the benefit pretty quickly. That’s usually where private insurance or simply reducing coverage becomes relevant.
The better way to frame it is not “keep or replace,” but “what job still needs to be done?” If there’s a clear, ongoing need, such as protecting a spouse from a real income gap, then keeping some level of coverage may be justified, whether through FEGLI or a private policy. If that need is gone, holding onto expensive coverage out of habit doesn’t make much sense. This is also where Basic alone can be enough. For many retirees, a reduced Basic benefit, paired with other assets, does exactly what it needs to do without driving long-term costs higher.
Final thoughts
FEGLI is not a set-it-and-forget-it benefit once retirement gets close. This decision will impact your coverage, your spouse, and your monthly cash flow for years.
So ask yourself:
- If something happened tomorrow, would your spouse actually be financially secure?
- Are you about to pay for coverage you don’t need, or drop coverage you still do?
- Do you know what this will cost you at 70 or 80, not just today?
The right answer is not always “keep everything,” and it is not always “drop everything.” For some retirees, Basic with maximum reduction is enough. For others, keeping select Optional coverage still makes sense.
If you’re within a few months of retirement, or even a year out, this is the time to get clarity before the forms are final.
Use the calendar below to schedule a conversation with G&R Financial Solutions and to help ensure your FEGLI decision holds up.
Sources
https://www.opm.gov/support/retirement/faq/life-insurance-coverage/
https://www.opm.gov/retirement-center/apply/fegli-calculator/option-c-family-insurance/
https://www.opm.gov/healthcare-insurance/life-insurance/program-information/
https://www.opm.gov/retirement-center/calculators/fegli-calculator/
