Federal retirees who kept Federal Employees’ Group Life Insurance Basic coverage pay $0, $0.75 or $2.25 a month per $1,000 of coverage starting the month after their 65th birthday, depending on the reduction option they chose at retirement. The Office of Personnel Management sets the rates by option: the 75 percent reduction is free after 65, the 50 percent reduction costs $0.75 and no reduction costs $2.25.
Those rates apply to the Basic amount in effect at retirement, and they stay flat for as long as the retiree keeps the coverage. The trade is plain. The option that costs the most keeps the most insurance, and the free option gradually gives most of it back.
The three FEGLI reduction options and their rates
OPM’s annuitant premium page lists the monthly cost per $1,000 of Basic coverage in two stretches. Until the month after the 65th birthday, the 75 percent reduction costs $0.3467, the 50 percent reduction costs $1.0967 and no reduction costs $2.5967. From the month after the birthday, the rates drop to $0, $0.75 and $2.25.
The page says retirees who chose the 50 percent or no-reduction option keep paying premiums for life unless they cancel or later elect the 75 percent reduction. The rates took effect on the first pay period that began on or after Oct. 1, 2021, and OPM says rates may change in the future.
The reduction itself is set in federal regulation. Under 5 CFR 870.703, the 75 percent option cuts the Basic amount by 2 percent of the original amount each month until the maximum reduction is reached, and the 50 percent option cuts it by 1 percent each month. Both start on the 65th birthday or the second month after the insurance would otherwise have stopped, whichever is later.
The 2 percent and 1 percent monthly steps set the pace. The 75 percent reduction reaches its limit in about 38 months, a little over three years, and the 50 percent reduction reaches its limit in 50 months, just over four years. After that, the 75 percent retiree holds 25 percent of the original Basic amount, the 50 percent retiree holds 50 percent and the no-reduction retiree still holds all of it.
Anyone who retired from federal service with FEGLI Basic and is approaching 65 faces the same question about what the rate change means in dollars on the annuity statement, because the premium is withheld from the annuity. The regulation requires the retiree to pick one of the options personally, and says no one else can make the election on the retiree’s behalf.
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What the monthly rates add up to
Take a retiree whose Basic amount at retirement was $50,000. Before 65, the 75 percent reduction costs about $17.34 a month, the 50 percent reduction about $54.84 and no reduction about $129.84. From the month after the 65th birthday, the 75 percent reduction costs nothing, the 50 percent reduction costs $37.50 and no reduction costs $112.50.
The yearly figure for the no-reduction retiree after 65 is $1,350, and for the 50 percent retiree it is $450. Over 20 years, from age 65 to 85, that is $27,000 for the no-reduction option and $9,000 for the 50 percent option. The 75 percent retiree pays nothing across the same 20 years.
The coverage left behind is the other half of the math. Once the reductions finish, the $50,000 Basic amount is down to $12,500 under the 75 percent option and $25,000 under the 50 percent option, while the no-reduction retiree keeps $50,000. The premium is calculated on the amount in effect at retirement, so the 50 percent retiree still pays $37.50 as the benefit settles at $25,000.
The order of those figures explains why the options exist. The no-reduction retiree pays $27,000 over 20 years toward a $50,000 benefit, while the 75 percent retiree pays nothing toward a $12,500 benefit. Neither is a better deal on its face. The comparison depends on how long the coverage is kept and what the family needs it to pay.
Changing the choice after retirement
OPM’s FEGLI program page says retirees on the 50 percent or no-reduction option can later elect the 75 percent reduction, which is the route to the $0 rate after 65.
The page says FEGLI coverage can be continued into retirement and that the post-65 benefit is prefunded through premiums paid earlier. That prefunding is why the premium drops at 65 without the coverage disappearing on the same day.
The cost is only one side of the coverage, since the Basic amount is the face value paid to a beneficiary. OPM publishes a FEGLI calculator that shows how the life insurance carried into retirement changes over time under each option, and the regulation points to the Basic amount in force as the Basic amount at retirement minus the reductions that apply.
For retirees past 65, the check is short. Find the option on the retirement paperwork or annuity statement, match it to the $0, $0.75 or $2.25 rate, and multiply by the number of thousands of dollars of Basic coverage that were in effect at retirement. If the monthly withholding does not match that figure, OPM’s retirement office is the place to ask.
Paying FEGLI premiums past 65?
A FEGLI deduction taken from an annuity every month for 20 years is a fixed cost that rarely gets a second look. At $2.25 per $1,000, a retiree who kept $50,000 of Basic coverage with no reduction pays $27,000 between 65 and 85, and that sits in the same budget as taxes and Medicare.
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This article was produced with AI assistance and edited for accuracy against the sources linked above.
