Whether to ditch FEGLI at age 62

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gtd98765
Posts: 620
Joined: Sun Jan 08, 2017 4:15 am

Whether to ditch FEGLI at age 62

Post by gtd98765 » Tue Jun 30, 2020 7:34 pm

I am a retired Fed with Federal Employees Group Life Insurance (FEGLI) basic, which costs me $61/mo for about $188K of insurance. One of the wrinkles of FEGLI is that you don't pay after your 65th birthday, and amount of insurance gradually is reduced over 2 years to 25% of its final value, which for me would be $47K.

I am now about 62.5, which means I could pay FEGLI the $61/mo for another 2.5 years, after which I get it free (although the amount of insurance gradually declines until it gets to 25%).

My question: I recognize that there are better term insurance deals than FEGLI in general. But in the case of someone like me, should I pay $1800 over the next 2.5 years to maintain some life insurance (I have other term life insurance, really enough for my family's needs)? What is the best way to think about this? Thanks.

123
Posts: 5972
Joined: Fri Oct 12, 2012 3:55 pm

Re: Whether to ditch FEGLI at age 62

Post by 123 » Tue Jun 30, 2020 7:45 pm

If you family would do fine without you having FEGLI I would discontinue it. While FEGLI may have been appropriate and reasonable when you signed up for it years ago there's a good chance your assets have grown and there is less or no need for FEGLI. Two things to consider is whether the FEGLI would increase the value of your estate by a significnat amount and whether that difference would be meaningful to your survivors.
Last edited by 123 on Tue Jun 30, 2020 7:47 pm, edited 1 time in total.
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gclancer
Posts: 693
Joined: Sat Apr 27, 2013 10:34 am

Re: Whether to ditch FEGLI at age 62

Post by gclancer » Tue Jun 30, 2020 7:46 pm

If you have an heir that you would like to have the money, and assume an age of death far beyond how long you think you’ll live, you can calculate the ROI on what the tax free death benefit will be based upon the remaining premiums to be paid. All premiums that have been paid to date are a sunk cost. I think you’ll find the ROI is good, especially compared to guaranteed returns that are available these days. All that said, I would continue to pay the premiums if I were in your shoes.

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