FEGLI Basic Reduction: The Retirement Choice That Decides Free or Paid Coverage

The short answer: The FEGLI Basic reduction you elect at retirement determines whether your life insurance becomes free or keeps costing you for life. The 75% Reduction option makes premiums free at age 65 while shrinking the benefit to 25%; the 50% and No Reduction options preserve more coverage but charge extra premiums.

Key Takeaways

• To carry Basic into retirement, you generally must have been insured for the 5 years immediately before retiring (OPM).
• The FEGLI Basic reduction election offers three choices: 75% Reduction, 50% Reduction, and No Reduction (OPM).
• Under 75% Reduction, coverage drops 2% per month after 65 to a 25% floor, and premiums become free (OPM).
• The 50% and No Reduction options keep more of the benefit but require extra premiums for life (OPM).
• Your Basic Insurance Amount equals your salary rounded up to the next $1,000, plus $2,000 (OPM).

Of all the FEGLI decisions a federal employee makes, the one at retirement may be the most consequential and the least understood. It quietly sets whether your Basic life insurance costs nothing in your later years or keeps drawing premiums from your annuity for the rest of your life. This article explains the three reduction elections using rules published by the Office of Personnel Management.

What Is FEGLI Basic Coverage?

FEGLI is the Federal Employees Group Life Insurance program, the group life insurance program made available to federal employees. Basic is its foundational layer: the coverage an eligible employee carries first, with the optional coverages sitting on top of it. Readers arriving at this topic for the first time sometimes assume Basic is a policy they design themselves. It is not. Its dollar amount is derived from salary under a formula published by OPM rather than chosen by the employee, and that derivation is set out further down in this article.

Cost works differently before and after retirement. During working years, an insured employee pays a premium for Basic through payroll. In retirement, any premium that continues is instead withheld from the annuity, which is why the reduction election described below has such a long financial tail. A retiree who is eligible to continue Basic and chooses to do so then faces the reduction choices. A retiree who prefers not to carry the coverage may also decline it altogether, in which case no premium is charged and no death benefit is payable.

What Is the FEGLI Basic Reduction Election?

The FEGLI Basic reduction election is the choice you make at retirement about what happens to your Basic life insurance as you age. Basic coverage does not simply continue unchanged. Instead, you select how much of it to keep and how much to pay.

First, eligibility. To keep Basic into retirement, you generally must have carried it for the 5 years of service immediately before your annuity begins, or since your first opportunity to enroll, per the OPM. This mirrors the five-year rule that applies to health coverage.

How Does the 75% FEGLI Basic Reduction Work?

The 75% Reduction is the default option if you do not choose otherwise. Under it, your Basic benefit begins reducing at age 65 (or at retirement, if later) by 2% of the original amount each month, according to the OPM. The reductions continue until the benefit reaches 25% of its pre-retirement value, where it then stays.

The appeal is cost. Once the reductions begin, your Basic premiums stop — the remaining coverage is free for the rest of your life. For retirees who view FEGLI mainly as final-expense coverage, the trade of a smaller free benefit can be attractive. The downside is obvious: three-quarters of the face value disappears over roughly twelve years.

What About the 50% and No Reduction Options?

The other two elections keep more coverage but charge for it. Under the 50% Reduction, the benefit drops 1% per month after 65 until it reaches 50% of the face value, and you pay an extra premium for life. Under No Reduction, the full Basic amount continues unchanged, but the additional premium is substantially larger and also continues for life.

These extra premiums are deducted from your annuity indefinitely, so the lifetime cost can be considerable. Whether the added coverage justifies the ongoing expense depends heavily on your other resources and your reasons for holding life insurance at all. Some retirees compare these FEGLI options against private coverage or against FEGLI Option C family coverage before deciding.

How Is the Basic Insurance Amount Calculated?

OPM rounds your annual basic pay up to the next $1,000 and adds $2,000, with a $10,000 floor. Because the figure is derived rather than chosen, it sets the base every reduction election is a percentage of — a $60,000 Basic amount leaves $15,000 of free coverage under the 75% Reduction.

For the step-by-step formula, a worked example, and the Extra Benefit that quietly doubles coverage for younger employees, see How your FEGLI Basic Insurance Amount is calculated.

How Should You Think About the FEGLI Basic Reduction?

There is no single right answer, because the elections serve different goals. The 75% Reduction prioritizes eliminating cost; the No Reduction option prioritizes preserving the death benefit. The 50% Reduction sits in between. Each retiree’s family situation, other insurance, and income picture point in a different direction.

What matters most is making the choice deliberately rather than by default. Because the 75% Reduction applies automatically if no election is filed, some retirees keep it simply because they never looked closely. Reviewing the numbers before you retire may help you avoid an outcome that does not match your intentions.

It can also help to picture the decision over a long horizon. A retiree in good health with substantial savings and grown children may have little need for a large death benefit, which points one way. A retiree whose spouse depends on that coverage, or who carries debt that would burden survivors, may weigh the ongoing premium differently. The same election can be reasonable for one household and ill-suited for another, which is why the figures matter more than any general rule of thumb.

How Does the Timing of the Reduction Work?

The reductions do not begin the day you retire. Under the 75% Reduction, they start at age 65 or at retirement, whichever comes later, and then proceed at 2% of the original amount each month. It takes roughly twelve and a half years of monthly reductions to reach the 25% floor, after which the remaining coverage holds steady for life.

That timing means a retiree who leaves at 60 keeps full Basic coverage, and full premiums, until 65. The free coverage and the shrinking benefit both kick in only once the age-65 trigger is met. Understanding this sequence can help you anticipate when your annuity deductions for Basic will stop under the 75% election.

This is the point where the phrase “free coverage” is most often misread. Under the 75% Reduction the coverage becomes free only on the far side of the age-65 trigger, so a retiree who leaves earlier pays premiums for the intervening years before any free benefit exists. Some federal employees weigh those interim years of premiums against the reduced benefit that follows them; that comparison, rather than the word “free,” is what separates the three elections.

One detail catches some retirees off guard: the election is effectively locked once made. While you can later cancel coverage or, in limited circumstances, switch to a greater reduction, you generally cannot move toward less reduction to regain coverage you let shrink. Treating the decision as a long-term one rather than something easily reversed tends to serve retirees better.

Frequently Asked Questions

What are the FEGLI Basic reduction choices at retirement?
Three: 75% Reduction, 50% Reduction, and No Reduction.

When does Basic coverage become free?
Under the 75% Reduction, premiums stop once reductions begin at age 65, and coverage is free for life thereafter.

How much coverage remains under the 75% Reduction?
The benefit shrinks 2% per month until it reaches 25% of its pre-retirement value.

Do the 50% and No Reduction options cost money?
Yes. Both charge an extra premium that continues for the rest of your life.

What happens if I make no election?
The 75% Reduction applies automatically as the default.

How is my Basic Insurance Amount figured?
Your salary is rounded up to the next $1,000, then $2,000 is added, with a $10,000 minimum.

What is FEGLI Basic?
Basic is the foundational coverage under the Federal Employees Group Life Insurance program, with its amount derived from salary rather than chosen by the employee.

Can a retiree drop Basic coverage entirely?
Yes. A retiree who does not wish to carry Basic may decline it, in which case no premium is charged and no death benefit is payable.

Make Your FEGLI Decision With Open Eyes

The reduction election is permanent in practice, so it pays to understand it before you file your retirement paperwork. Fed Pilot’s free educational workshops walk federal employees through FEGLI and the rest of the benefits package. Register for a free Fed Pilot workshop to review your life insurance options before you retire.

This article is educational and reflects rules published by the Office of Personnel Management as of 2026. Premium figures are subject to change. Individual circumstances vary.