FEGLI in retirement: the one-time election that sets your cost for life
Somewhere in your retirement paperwork is a form — SF 2818 — that quietly makes one of the most durable financial decisions of your life. It sets how your federal life insurance behaves after 65: whether it becomes free, shrinks, or costs you a premium every month for the rest of your life. Get it right and your Basic coverage costs nothing after 65 while still leaving a death benefit. Get it wrong — or cancel coverage in the wrong five-year window — and you either overpay for decades or lose the coverage entirely. Here’s how the 75%, 50%, and No-Reduction elections work, the 5-year rule that can disqualify you, the Option B cliff that surprises retirees, and a calculator for all three.
1. The four pieces of FEGLI
Federal Employees’ Group Life Insurance comes in four separately-priced layers:
While you’re working, the government pays a third of your Basic premium. In retirement, that subsidy ends and your choices narrow to a single decision per layer — made once, at retirement, and very hard to undo.
2. The 5-year rule comes first
To carry any FEGLI into retirement, you must have held that coverage for the five years of service immediately before retiring (or since your first chance to enroll, if shorter). It applies separately to Basic and each Option. The trap: cutting FEGLI to save a little in your final working years can permanently disqualify that coverage from continuing — and you generally can’t add it back later. If there’s coverage you want in retirement, carry it through the five-year gate.
3. The Basic election: 75%, 50%, or No Reduction
On SF 2818, you choose how Basic behaves after 65:
75% Reduction (default). Starting the month after you turn 65, coverage drops 2% per month until only 25% of its value remains — and once the reduction begins, you pay nothing. Free coverage for life, at a quarter of the face value.
50% Reduction. Coverage drops 1% per month to 50% of value; you keep paying a modest premium for life (about $0.75 per $1,000 per month after 65).
No Reduction. Full coverage stays intact for life — but you pay the highest premium (about $2.25 per $1,000 per month after 65), forever.
4. Compare the three
Enter your Basic Insurance Amount (roughly your final salary rounded up plus $2,000) to see the monthly cost and final coverage under each election.
Your Basic coverage
Retiree Basic premiums used: 75% = $0.3467, 50% = $1.0967, No Reduction = $2.5967 per $1,000/month until 65. After 65: 75% free, 50% $0.75, No Reduction $2.25.
Basic coverage only. Estimates from published FEGLI retiree rates; your official amounts come from OPM. A planning estimate, not advice.
5. Options A, B & C in retirement
Option A ($10,000) holds until 65, then reduces 2%/month to $2,500 and becomes free. Option B (1–5× salary) and Option C (family) each get their own choice: Full Reduction, where coverage drops to $0 over 50 months after 65 (and premiums stop), or No Reduction, where you keep the coverage and pay age-banded premiums for life.
6. The Option B cliff
Option B No-Reduction premiums are cheap at 50 and brutal at 80. Because they’re age-banded, the cost per $1,000 jumps at each five-year age bracket — and by your late 70s and 80s, keeping several multiples of salary in Option B can cost hundreds of dollars a month. Retirees who bought a comparable term policy while healthy, or who are simply self-insured, often let Option B reduce to zero. The mistake isn’t keeping it — it’s keeping it without running the age-70-and-beyond math first.
7. FEGLI vs. the survivor annuity
FEGLI is a lump sum; the FERS survivor annuity is lifetime monthly income for your spouse — and it’s what preserves their FEHB health coverage. Because the survivor annuity carries that FEHB link and is inflation-adjusted for life, the usual order of operations is: secure the survivor annuity first, then decide how much FEGLI lump-sum coverage still makes sense on top. Buying heavy Option B to “replace income” that a survivor annuity already replaces is a classic case of paying twice.
8. The costly mistakes
Four recur: (1) canceling FEGLI in the five years before retirement and losing it for good; (2) dropping all FEGLI to save money — when Basic under the 75% Reduction is free after 65; (3) electing Full Reduction on Option B and not realizing the coverage marches to $0; and (4) keeping No-Reduction Option B without pricing the age-banded premiums into your 80s. Every one of these is locked in by that single retirement election — so it’s worth an hour with the numbers before you sign.
9. Frequently asked questions
What are the FEGLI reduction elections at retirement?
When you retire, you make a one-time election on Form SF 2818 for how your FEGLI Basic coverage behaves after age 65. The 75% Reduction (the default) lets your coverage drop 2% per month starting at 65 until only 25% of its value remains, and once the reduction begins you pay no premium — it becomes free. The 50% Reduction drops coverage 1% per month to 50% of its value, and you keep paying a modest premium for life. The No Reduction option keeps your full coverage permanently, but you pay the highest premium for the rest of your life. The election is effectively irreversible after retirement, so it’s worth choosing carefully.
What is the FEGLI five-year rule?
To carry any FEGLI coverage into retirement, you must have been enrolled in that coverage for the five years of service immediately before you retire, or since your first opportunity to enroll if that’s less than five years. This applies separately to Basic and each Option. The practical warning: don’t cancel or reduce FEGLI in the five years before you retire to save money, because doing so can permanently disqualify that coverage from continuing in retirement. There are very limited exceptions, but as a rule, the five-year window before retirement is not the time to drop coverage you want to keep.
Is FEGLI free after age 65?
Only under the 75% Reduction election. If you choose the 75% Reduction for your Basic coverage, you stop paying premiums once the post-65 reduction begins, and your coverage settles at 25% of its pre-retirement value at no cost for life. Under the 50% Reduction you keep paying a reduced premium after 65, and under No Reduction you pay the full, higher premium for life. Option A also stops charging premiums after 65 while reducing to $2,500. Options B and C, if you keep them without reduction, charge age-banded premiums that rise steeply as you age — they are never free.
Should I keep FEGLI in retirement or drop it?
It depends on your coverage type and needs. Many retirees keep Basic under the 75% Reduction because it becomes free after 65 while still leaving a modest death benefit — there’s little reason to drop free coverage. The harder call is Option B (multiples of salary): its no-reduction premiums climb sharply with age, so keeping large Option B coverage into your 70s and 80s can cost far more than a comparable term policy or your own investments would. Retirees who are self-insured — with a paid-off home, a survivor annuity, and savings — often let Option B reduce or drop it. Run your own numbers before your one-time election locks in.
How does FEGLI relate to the FERS survivor annuity?
They’re two separate protections for the same person — your survivor — and they work best considered together. The FERS survivor annuity provides your spouse ongoing monthly income after you die and is also what keeps their access to FEHB health coverage. FEGLI provides a lump-sum death benefit. A common planning approach is to secure the survivor annuity first (because it carries the FEHB link and is inflation-adjusted for life), then decide how much FEGLI lump-sum coverage still makes sense on top of it. Over-buying expensive Option B coverage when a survivor annuity already replaces income is a frequent, costly mistake.