Should you keep FEGLI Basic into retirement?

First, can you keep it at all

Two conditions, both hard-edged. You must retire on an immediate annuity, and you must have carried Basic for the five years immediately before you retire, or for your entire period of eligibility if that is shorter. Miss the test and the coverage simply ends, with a 31-day conversion window and nothing else.

The three elections

Your Basic amount is frozen at retirement: your final salary rounded up to the next $1,000, plus $2,000. What happens to it from 65 is what you elect on form SF 2818.

• 75% Reduction. From the second month after you turn 65, the amount falls 2% a month until 25% is left. It stays there for life and costs nothing.
• 50% Reduction. The amount falls 1% a month until half is left. You pay an extra premium for as long as you live.
• No Reduction. The full amount stays. You pay a much larger extra premium for life.

What each one costs

Rates are per $1,000 of Basic coverage, per month. A retiree with a final salary of $85,000 carries $87,000 of Basic, so multiply by 87.

Every retiree pays the base rate until 65, whichever election they make. What separates them is the extra premium on top, and whether it ever stops.

The arithmetic nobody runs

Compare each paid election against the free one, and ask what the extra death benefit costs.

Both elections hand over roughly seventy cents for every dollar of extra death benefit, and that is before you consider that the money is paid across twenty years while the benefit arrives once. Live past 85 and you cross the line where you have paid in more than the extra coverage is worth.

The 75% Reduction leaves $21,750 of free, permanent cover. For most retirees that is what Basic is for: a burial and final expenses, not income replacement.

Who should pay for more

• Someone genuinely depends on the death benefit. A disabled adult child, or a spouse whose survivor annuity would not cover the bills.
• You are uninsurable. If private cover is closed to you, FEGLI at an ugly price may still be the only cover available.
• You have a specific debt that outlives you. A mortgage co-signed with a partner who could not carry it alone.

If none of those apply, the pattern that usually works better is the 75% Reduction plus, if you still need real cover, a private policy priced while you are healthy. We ran that comparison in FEGLI vs. private term life.

Filing the election

• Submit form SF 2818 to your HR office shortly before you retire. It is not automatic, and the default is not always what you want.
• Check your first few annuity statements. Extra premiums appear as a separate deduction, and errors here are common.
• You can drop to the 75% Reduction at any point later, and the extra premium stops. Nothing is refunded.
• Update your beneficiary form, SF 2823, at the same time. Retirement does not carry it over automatically.

Common questions