What Healthcare Really Costs in Federal Retirement: A 20-Year Budget Guide for FEHB Enrollees

The short answer: FEHB retirement healthcare coverage continues for eligible federal retirees — but costs rise significantly over time. The federal government contributes approximately 72% of the weighted average premium across all plans. However, healthcare costs typically rise faster than general inflation. FEHB premiums increase most years. Over a 20–25 year retirement, cumulative out-of-pocket healthcare costs can easily exceed $100,000 per person — making this one of the largest and most underplanned expenses in federal retirement. (OPM.gov FEHB; 5 U.S.C. § 8906)

Key Takeaways

• To continue FEHB into retirement, a federal employee must have been enrolled in FEHB for the five years immediately before retirement (or since first becoming eligible, if less than five years). (OPM.gov)
• In retirement, federal employees pay the same FEHB premiums as active employees. The government still pays approximately 72% of the weighted average premium under 5 U.S.C. § 8906.
• FEHB premiums have increased most years. Healthcare inflation historically outpaces general CPI, making long-term budgeting for premiums important for federal retirees.
• After age 65, most federal retirees are eligible for Medicare. Coordinating Medicare with FEHB can reduce out-of-pocket costs — but adds premium complexity. Medicare Part B runs approximately $185/month or more in 2026, depending on income.
• Healthcare is one expense that cannot be easily deferred or cut in retirement, unlike discretionary spending — making a realistic projection worthwhile before leaving federal service.

Does FEHB Retirement Healthcare Continue After You Leave Federal Service?

For most federal employees, the answer is yes — with one important condition. To carry FEHB coverage into retirement, an employee must have been continuously enrolled in FEHB for the five years immediately before retirement. Enrollment must be in the employee’s own name, not as a dependent. According to OPM.gov, this five-year enrollment requirement is one of the most common reasons employees lose access to FEHB in retirement.

Employees who switch agencies or take a break in federal service should verify their enrollment history well before their planned retirement date. Employees enrolled only as a dependent under a spouse’s plan should do the same. Once FEHB coverage lapses at retirement, it generally cannot be reinstated.

For those who do carry FEHB into retirement, coverage operates largely the same as during active service. Retirees select their plan during the annual Open Season, receive their benefits card, and use the plan’s provider network just as they did while working. OPM deducts the premium from the monthly annuity payment rather than from a paycheck.

What Do Federal Retirees Actually Pay for FEHB?

Under 5 U.S.C. § 8906, the federal government contributes approximately 72% of the weighted average premium across all FEHB plans. The enrollee pays the remaining share. That share is the same for both active employees and retirees — there is no separate “retiree premium” tier.

This means retirees are not penalized with higher premiums simply for being retired. A retiree and an active employee enrolled in the same plan pay the same monthly premium. However, a paycheck that grows with cost-of-living increases over time is very different from a fixed annuity. Rising premiums represent a larger percentage of income over a long retirement.

FEHB premiums vary considerably by plan, tier (Self Only, Self+1, Self and Family), and region. The OPM plan comparison tool at OPM.gov provides current premium information for each available plan.

For a detailed breakdown of how the FEHB premium structure works, see FEHB Premiums in Retirement: What Federal Retirees Actually Pay for Health Coverage.

How Much Could Healthcare Cost Over a 20-Year Retirement?

Projecting healthcare costs in federal retirement involves two main variables: current premium costs and their annual rate of increase. Healthcare inflation has historically outpaced general CPI. The increase often runs in the 4–6% annual range for group health insurance premiums, though this varies by year and plan.

If a federal retiree currently pays approximately $300 per month in FEHB premiums — a rough illustration, since actual premiums vary widely — and those premiums increase at 5% per year, the monthly cost would grow to approximately:

• Year 5: ~$383/month
• Year 10: ~$489/month
• Year 20: ~$796/month

Over 20 years at this rate, cumulative out-of-pocket FEHB premiums alone could approach or exceed $100,000. That figure does not include deductibles, copays, and out-of-pocket medical costs the plan doesn’t cover. For Self and Family or Self+1 enrollees, the numbers scale proportionally higher.

Healthcare spending also tends to increase with age. A retiree in their late 70s or 80s typically faces higher out-of-pocket medical costs than in their early retirement years. This holds true even with strong insurance coverage. The total healthcare burden often grows over time in both dollar amount and as a percentage of income.

What Happens to FEHB After You Turn 65?

Federal retirees generally become eligible for Medicare at age 65. For FEHB retirees, this creates an important decision. Should you enroll in Medicare Part B (outpatient coverage, doctor visits, and lab tests) in addition to your FEHB plan?

Medicare Part B is not free. The standard monthly premium in 2026 is approximately $185. Higher-income retirees pay more through income-related adjustment amounts (IRMAA). The key question is whether adding Medicare Part B creates enough savings on FEHB cost-sharing to justify its cost.

When Medicare pays first and FEHB pays second, many FEHB plans waive their deductibles. They also cover most cost-sharing that Medicare doesn’t pay. For retirees with significant medical utilization, this coordination can result in near-zero out-of-pocket expenses. For retirees who are generally healthy, the math may look different.

A separate question is whether to suspend FEHB and enroll in Medicare Advantage instead. The post Should You Drop FEHB for Medicare Advantage in Retirement? covers this decision in detail.

How Does Healthcare Fit Into the Broader Federal Retirement Budget?

Financial planners who work with federal employees frequently note this point. Healthcare costs are one of the most underestimated expenses in federal retirement planning. Unlike housing — which may be paid off — or work-related costs that disappear entirely, healthcare is a rising expense with no natural ceiling. It typically cannot be deferred the way discretionary spending can.

FEHB does provide meaningful protection. The continuation into retirement for eligible employees and the government’s significant premium contribution are real advantages. But the enrollee share, combined with Medicare Part B premiums and out-of-pocket medical expenses, can add up to a substantial annual figure.

For context on other retirement preparation steps, see Federal Retirement Countdown: Your 12-Month Action Plan Before You Leave Federal Service and 2027 FEHB Changes: GLP-1 Drug Coverage Rules and OPM’s Well Care Shift.

The biggest mistake in FEHB retirement healthcare planning is treating premiums as a fixed cost when they typically increase 4-6% per year.

Frequently Asked Questions

What if I wasn’t enrolled in FEHB for five full years before retirement?
If you did not meet the five-year enrollment requirement, you generally cannot continue FEHB into retirement. Some exceptions apply under certain special authority retirement provisions. Employees in this situation should review their options carefully with their agency’s HR office well before their planned retirement date. OPM guidance is available at OPM.gov.

Can I change my FEHB plan in retirement?
Yes. Federal retirees participate in the annual FEHB Open Season, typically held each November, and can change plans at that time. Changes take effect January 1 of the following year. Outside of Open Season, plan changes are generally only allowed following qualifying life events such as marriage, divorce, or a spouse’s loss of other coverage.

Is FEHB premium deducted from my FERS annuity pre-tax or post-tax?
In most cases, FEHB premiums deducted from a federal annuity payment are on a post-tax basis. This differs from active service, where premiums are typically pre-tax under a premium conversion arrangement. This distinction affects the net after-tax cost of FEHB in retirement compared to during active service.

Will FEHB still be available in 20 or 30 years?
FEHB is a statutory program established under federal law. Any changes would require congressional action. While the program’s structure could theoretically change over time, it has been continuously available to federal retirees since its establishment. OPM’s annual Open Season announcements provide plan changes and premium updates each fall.

Does my FEHB coverage end if my annuity is suspended for any reason?
If an annuity payment is insufficient to cover the FEHB premium — due to garnishments or other deductions, for example — OPM will contact the retiree about paying premiums directly. FEHB coverage does not terminate immediately in this situation, but premiums must be paid to maintain enrollment.

How should I factor in healthcare costs when deciding when to retire?
Healthcare cost planning is one aspect of the overall retirement readiness picture. Whether retiring at 57 versus 62 versus 65 changes your FEHB situation is one question worth exploring. Medicare eligibility, the SRS, and how much you’ll rely on each income source are all interconnected factors. Some federal employees find it useful to walk through these scenarios at a structured workshop before making final retirement decisions.

If you’d like to explore your healthcare and overall retirement income picture before you leave federal service, a free Fed Pilot workshop provides an educational overview of all three legs of the FERS system — including FEHB — with no sales pitch or product to buy.