FEGLI in Retirement: The Five-Year Rule and the 75% Reduction

Updated June 2026 · Educational only — not financial, tax, or legal advice

Your federal life insurance — FEGLI — can follow you into retirement, but the rules and costs change in ways that catch people off guard. Like health insurance, it has a five-year rule. And unlike your working years, FEGLI in retirement can get expensive fast, which makes it one of the more common places where a different approach saves real money.

The five-year rule (again)

To carry FEGLI into retirement, you generally must have been enrolled in the coverage for the five years immediately before you retire, or since your first opportunity to enroll. It mirrors the FEHB five-year rule — and it's just as unforgiving, so verify your enrollment history early.

Basic FEGLI: your reduction election

When you retire with Basic coverage, you choose how it behaves after age 65 (when the premium structure changes):

The 75%-reduction election is what most people pick, because it's free after 65 — you trade most of the death benefit for zero premium in retirement.

The Options (A, B, and C)

• Option A (Standard) — a flat additional amount that reduces after 65, similar in spirit to the Basic reduction.
• Option B (Additional) — multiples of your salary. You elect full reduction or no reduction; the no-reduction cost rises steeply with age, which is where retirees often get sticker shock.
• Option C (Family) — coverage for spouse and eligible children, also with reduction choices.

Why private term insurance is often the cheaper move

FEGLI Option B with no reduction is priced by age, and the premiums climb sharply through your 60s and 70s. If you're in reasonable health, a level-premium private term policy purchased while you're younger and healthy can lock in a lower rate for a set term — frequently far less than what FEGLI Option B costs at older ages.

This is a comparison, not a recommendation: FEGLI requires no medical exam and is convenient, which matters if your health makes private coverage expensive or unavailable. The point is to price both before you retire, rather than defaulting into FEGLI and discovering the cost later. And remember the bigger picture — your life-insurance need often shrinks in retirement as the mortgage shrinks, the kids launch, and your pension (with any survivor election) covers your spouse.