FEGLI Option B After 60: When to Drop It
FEGLI Option B premiums spike at 60, 65, 70, and 75. Here is the math on when keeping it makes sense and when private term saves you thousands.
FEGLI Option B is one of the best deals in the federal benefits package for employees under 50. By 60, it becomes one of the worst. The biweekly cost per $1,000 of coverage jumps from $0.23 in the 55 to 59 bracket to $0.52 at age 60. It nearly triples again by 75. Most federal employees never run the numbers until the premium shock hits their paycheck.
How FEGLI Option B Works
Option B provides additional life insurance in multiples of your annual basic pay. You can elect 1, 2, 3, 4, or 5 times your salary in coverage. Unlike Basic FEGLI (which the government subsidizes by paying one-third of the premium), Option B is 100% employee-paid. There is no government contribution.
The premium is not flat. It resets every time you cross an age-band threshold at ages 35, 40, 45, 50, 55, 60, 65, 70, 75, and 80. Each jump is steeper than the last.
The Rate Table That Matters
Here is the current FEGLI Option B cost per $1,000 of coverage, per biweekly pay period:
| Age Band | Biweekly Cost per $1,000 | Annual Cost per $100K Coverage |
|---|---|---|
| Under 35 | $0.02 | $52 |
| 35-39 | $0.03 | $78 |
| 40-44 | $0.05 | $130 |
| 45-49 | $0.08 | $208 |
| 50-54 | $0.13 | $338 |
| 55-59 | $0.23 | $598 |
| 60-64 | $0.52 | $1,352 |
| 65-69 | $0.62 | $1,612 |
| 70-74 | $1.14 | $2,964 |
| 75-79 | $1.80 | $4,680 |
| 80+ | $2.40 | $6,240 |
The jump from the 55 to 59 band to the 60 to 64 band is a 126% increase. From 60 to 70, the cost per $1,000 more than doubles again.
What This Costs in Real Dollars
A GS-13 Step 5 in the Virginia Beach locality area earns approximately $117,962 in 2026 (base pay $99,296 plus 18.80% VB locality). With 3 multiples of Option B coverage, that is roughly $354,000 in life insurance.
Here is what that GS-13 pays for 3x Option B at each age band:
| Age Band | Biweekly Premium | Annual Premium |
|---|---|---|
| 50-54 | $46.02 | $1,196.52 |
| 55-59 | $81.42 | $2,116.92 |
| 60-64 | $184.08 | $4,786.08 |
| 65-69 | $219.48 | $5,706.48 |
| 70-74 | $403.56 | $10,492.56 |
| 75-79 | $637.20 | $16,567.20 |
At 60, the annual cost is $4,786. At 75, it is $16,567. For the same $354,000 in coverage.
What Does Private Term Insurance Cost?
A healthy 60-year-old non-smoker can typically obtain a 10-year level-premium term policy for $350,000 in coverage at roughly $150 to $250 per month, depending on health class. That is $1,800 to $3,000 per year, compared to FEGLI’s $4,786 for the same amount.
| Coverage Option | Annual Cost at Age 60 | Annual Cost at Age 70 |
|---|---|---|
| FEGLI Option B (3x, $354K) | $4,786 | $10,493 |
| Private 10-year term ($350K, preferred) | ~$2,400 | ~$7,200 |
| Private 10-year term ($350K, standard) | ~$3,000 | ~$9,600 |
The savings from switching at 60 are roughly $1,786 to $2,386 per year. Over a 10-year policy term, that is $17,860 to $23,860 in total savings.
When Keeping FEGLI Option B Makes Sense
The math above assumes you can qualify for private coverage. That is not guaranteed. FEGLI Option B has one enormous advantage: no medical underwriting. You were enrolled based on your federal employment, not your health. Note that the death benefit itself is generally received income-tax-free by beneficiaries under IRC §101, though premiums you pay are not deductible.
Keep Option B if:
- You have a serious health condition that would result in a decline or a rated (more expensive) policy from a private insurer. Diabetes, heart disease, cancer history, or other significant conditions can make private insurance prohibitively expensive or unavailable.
- You are uninsurable. If no private carrier will issue you a policy at any price, FEGLI is your only option.
- You need coverage past 80. Private term policies rarely extend beyond age 80. FEGLI Option B continues (at $2.40 per $1,000 biweekly), making it one of the few coverage options for federal retirees in their 80s.
- You only need 1 multiple. At a single multiple, the dollar amounts are more manageable, and the hassle of shopping private coverage may not justify the savings.
When to Drop It
Drop Option B (or reduce multiples) if:
- You are healthy and insurable. Get quotes from multiple carriers before dropping FEGLI. Lock in a level-premium term policy first, then cancel Option B.
- Your insurance need has decreased. If your mortgage is paid, your children are financially independent, and your spouse has their own FERS annuity or sufficient assets, you may not need $350,000 in life insurance at all.
- The premium is eating into your retirement income. A retiree paying $16,567 per year for Option B at age 75 is spending more than $1,380 per month on life insurance alone. That is a meaningful chunk of a FERS annuity.
The Reduction Schedule in Retirement
If you keep Option B into retirement, you have two choices:
- Full reduction (free). Coverage reduces by 2% per month starting at age 65, reaching zero at age 100. No premium is charged after reduction begins. See OPM’s guidance on FEGLI in retirement for the full reduction rules.
- No reduction. You keep the full face amount, but you pay the full premium at the applicable age band for life.
Most retirees who keep Option B choose the full reduction option to avoid the escalating premiums. But this means the coverage amount shrinks steadily. By age 75, a $354,000 policy under full reduction would be down to roughly $141,600 (60% reduction over 10 years).
The Decision Framework
Ask three questions:
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Do I still need this much life insurance? Run a needs analysis. If your surviving spouse’s income (FERS annuity, Social Security survivor benefits, investments) covers expenses without the death benefit, reduce or eliminate coverage.
-
Can I get private coverage? Get quotes. If you are healthy, a 10- or 20-year level term policy will almost certainly beat FEGLI Option B on price at age 60 and beyond.
-
What is my breakeven? Calculate the annual savings from switching to private coverage and compare it to the effort and any health risk of changing insurers.
For a deeper look at how your FERS annuity fits into retirement planning, see our guide to the FERS Supplement explained. If you are weighing the VERA or VSIP decision at NASA Langley or the shipyard, our analysis of VERA and VSIP decisions covers the financial trade-offs. And for the broader question of how much coverage you actually need, see how much should you have saved for retirement by age.
Ferrante Capital LLC is a registered investment adviser. Information presented is for educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. All investing involves risk, including the possible loss of principal.
FC and its principals may hold positions in GS. This analysis is for educational purposes only and does not constitute a recommendation to buy, sell, or hold any security.
Forward-looking statements reflect Ferrante Capital’s current analysis and involve assumptions and estimates. Actual results may differ materially. Past performance is not indicative of future results.
Please consult a qualified financial professional before making investment decisions.
