What should federal employees actually do with their life insurance, and when does FEGLI stop making sense? In this episode, John and Tommy break down everything you need to know about Federal Employees’ Group Life Insurance (FEGLI), including Basic coverage, Options A, B, and C, and how these choices evolve throughout your career and into retirement. You’ll learn how FEGLI pricing really works, why Option B becomes expensive over time, and when it might make sense to explore term life insurance instead.
Listen to hear about the real-life process of applying for term life insurance, what to expect during underwriting, and how your health plays a major role in your options. Beyond policies, this episode dives into how life insurance connects to survivor benefits, estate planning, and long-term financial strategy, helping you understand not just what to choose, but how to make smarter, more confident decisions over time.
Listen to the full episode here:
What you will learn:
- The process of dealing with life insurance. (10:50)
- What the term life insurance application process looks like. (12:00)
- What FEGLI is and how Basic & Options A, B, and C work. (21:00)
- How FEGLI Option B pricing increases over time. (25:00)
- What to consider if you have FEGLI Option B and you’re approaching age 65. (33:45)
- Why you should never cancel coverage for a trendy insurance option. (41:00)
- The role of survivor benefits alongside life insurance. (44:00)
Ideas Worth Sharing:
- “We definitely embrace technology at this firm because we do think it allows us to enhance the client experience. It allows us to be better at what we do, be more efficient at the things—maybe behind the scenes—that allow us to be more human-facing.” – Mason & Associates
- “If you can afford to retire, you can likely afford to die.” – Mason & Associates
- “Taking your health seriously has financial benefits both in the insurance phase of life, as well as overall long-term healthcare spending.” – Mason & Associates
Resources from this episode:
- FEFP: Why Federal Employees Can’t Afford to Ignore Insurance with Broc Buckles (EP98)
- Term4Sale.com
- Mason & Associates: LinkedIn
- John Mason: LinkedIn
- Tommy Blackburn: LinkedIn
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Read the Transcript Below:
Thank you for tuning in to another episode of the Federal Employee Financial Planning Podcast. Are you interested in moving from general education to personalized advice? You can start that process at masonllc.net. That’s masonllc.net, or give us a call at 757-223-9898.
If you’re not ready to take that next step, that’s okay. Keep hanging out with us right here on YouTube and our Federal Employee Financial Planning Podcast.
John Mason: Welcome to the Federal Employee Financial Planning Podcast and the Mason & Associates YouTube channel. In this episode, we’re discussing everything Federal Employees’ Group Life Insurance, or FEGLI, and some term life insurance.
In this episode, we’re specifically talking about the components of FEGLI—that’s Basic, Options A, B, and C. We’re going to highlight the options at retirement. We’re going to talk about replacing FEGLI with term life insurance, and overall, we want to talk about the process for a term life insurance application because, Tommy, Ben, and I recently went through that.
Finally, we’re going to talk about how FEGLI and term life insurance coordinate with—you guessed it—survivor benefits. And folks, everything that you hear in this episode is not financial planning, tax planning, or legal advice. Specifically, we don’t want you running out from this episode and dropping your Federal Employees’ Group Life Insurance. It’s not a license to drop; it’s a license to shop. So, we hope we can educate you on all things Federal Employees’ Group Life and life insurance in this episode.
Tommy, welcome to the Federal Employee Financial Planning Podcast.
Tommy Blackburn: Hey, buddy. It’s good to be here with you today. I hope our audience is going to enjoy the recording that we’re putting together today talking about, as you said, FEGLI, life insurance, survivor benefits. I’m doing pretty well. Nice weekend. We had some pleasant weather. It was nice for us to get our families together at that nice event that the club put on. So yeah, doing pretty well.
And actually, maybe as a little bit of… I don’t know that we were going to share this on the podcast right now, but John and I have been beginning to play with “vibe coding,” as it’s called. Now, we don’t do this—we’ve isolated it. We’re not doing it on anything work-related; these are on completely separate machines. But yeah, so that’s keeping us busy too, as him and I are beginning to play around with vibe coding and just trying to get a little bit of an understanding of what it is and what the capabilities are. We think we’ve got a lot to learn, but it’s been pretty cool to play with.
And prior to that, yeah, it’s just—it’s always a lot going on, John. We had that technology conference too recently, so our minds are spinning with everything: family, business, technology. We’ve got it all going. Surge, our strategic planning meeting season, is rapidly coming, so yes, it is never dull around here, but a lot of good things going on.
John Mason: Well, audience, today is March 23, 2026, and elaborating, Tommy, on a few of the things that you said: one, we’re excited for spring break coming up. So, by the time this airs, we’ll have gotten back from an RV trip. You’ll have had a nice staycation with the kids, and that’s a nice way to—I don’t know if relax and recharge is the right term, but it’ll be nice to have some family time as we head into strategic planning meeting season.
So, we’ve got spring break coming up. We have strategic planning meeting season coming up. When this airs, it might be right in the middle of SPM season. So audience, just know that we do intro calls on Mondays during strategic planning meeting season. The planning process will pick back up again in June. We do not kick off initial plans during April and May because we’re focused on clients.
Tommy, you mentioned vibe coding as well as T3, the technology conference in New Orleans that we just went to. And I think what’s—one, we’re keeping it on a completely separate machine. We’re not commingling it with any of our work stuff or client data. We’re not putting any PII in there. Frankly, it’s scary how cool some of this vibe coding is. So T3, audience, was a really cool place. Mason & Associates is always going to be on the front end of trying to—maybe not be the first adopter of new technology, Tommy, but certainly, we want to be with it, and we want to be competitive.
And there’s another financial planning or RIA out there who went on record basically saying that they’re hoping, or their plan is, to automate themselves out of having any human financial advisors at the firm. Which—tangent alert, audience—we’re going to talk about AI a little bit, but I don’t see AI replacing the human advisor. You and I have talked about this numerous times. It’s going to enhance the things that we can do. So for instance: “read this trust and give me a summary,” or “give me a recap of everything that happened last year with the client.” It doesn’t replace the human element, and our associate Kyle recently said that we do such a good job holding our clients’ hands through some of these one-time irrevocable decisions.
And as you and I talk about AI, it’s going to enhance what we can do on a daily basis so that we can provide more human elements and more human touch to our clients. We’re actually going the opposite of what a lot of other people are doing. They’re hoping to automate the personality and the humans out of things. We’re hoping to automate the tedious stuff that doesn’t add value so that we can then add value by being really good humans, like responding to emails that are not coming from a chatbot, answering the phone where it’s not a decision tree, being able to get to know somebody as a human and say, “I know ChatGPT Tommy is giving me this answer, but I’ve been working with you for seven years, and let’s just call it how it is. That’s not you.”
Tommy Blackburn: Right. Yeah, we’re… so you said we’ll never be, maybe the first movers on technology, which is safe, I think, to assume because we do want to make sure we’re secure and well-thought-out in anything we embrace. But we definitely embrace technology at this firm because we do think it allows us to enhance the client experience. It allows us to be better at what we do, be more efficient at the things—maybe behind the scenes—that allow us to be more human-facing.
So I think generally we’re excited about it. We have a healthy level of fear, I guess. Maybe fear is just not the right word, but just a level of respect of “let’s understand what we’re getting ourselves into” before we get out over our skis, so to speak. But I think like most other technology that we’ve embraced, it’s just going to allow us to be better, stronger, faster, and really bring that to bear for our clients, and the human element’s not going anywhere. That’s what it’s all about. So, I’m pretty excited actually about being able to automate things, have more consistent processes, and just take away some of the mundane and necessary things to allow us to focus on what’s more important.
So, exciting. We’re still making sure we get a good grasp on all of it, and some big changes coming, and I think hopefully it’s going to all be very positive for us and our clients and our team.
John Mason: Well, because we have used technology and leveraged technology, we’re able to deliver a very high-quality service with a pretty lean team. And I just want to hit again for the audience, Tommy, like there’s not a lot of value to our clients. I mean, well, let me take that back. There’s a lot of value in the fact that we do all the paperwork so they don’t have to.
Tommy Blackburn: Oh, yeah.
John Mason: But at the end of the day, if an agent or something or a process can automate the filling of forms so that Kelsey, Asine, Leah, Bobby, me, you, all the advisors, can pick up the phone and call the client or send a better, well-thought-out email because we didn’t spend an hour doing forms, we could spend an hour on the phone if we had to, or an hour solving actual problems rather than things that arguably don’t add a lot of value.
So yes, we want to do those little things. Those are the things that are very labor-intensive: updating the CRM, doing all these things that, you know, we need to check those boxes. But really where we want to be focusing our time is having dialogue with clients, or communicating with clients, or meeting with clients, not on all those backend processes that they don’t see anyhow.
So, a couple of things as we dive into the episode. I wrote down some interesting facts, Tommy. You probably saw them on the Google Doc that I shared with you. But this ties directly into life insurance and overall health. Audience, you probably are aware that Tommy and I both see a concierge medicine, and we do quarterly blood work and stuff, so we recently applied for life insurance individually, and you’ll be happy to know that we both were issued “Preferred Best.” That was very exciting for us. It would’ve certainly seemed like not a good investment of resources to meet with a concierge doctor to come back at “Standard” or “Substandard” after doing all the things that we’re doing. So, that was really cool to get Preferred Best. Those life insurance policies will be in force soon.
ChatGPT told me today that estimated medical expenses for a retired couple—65 today—I think this was a couple, $315,000 to $400,000 in premiums and out-of-pocket expenses over your retirement, specifically more like $80,000 to $120,000 out-of-pocket. So as we think about all things insurance, life insurance and health, the earlier you can take control over your health, spend those resources so that you can replace FEGLI, spend those resources so you don’t have to go to the doctor, work out, do all the things, like, it is very important, Tommy.
And some of the things we’re talking about today are: if you are uninsurable or not healthy, replacing Federal Employees’ Group Life Insurance maybe isn’t an option for you; it takes us down a different path, certainly makes survivor benefits even more compelling. So, I thought it just made sense, one, to brag a little bit that we got Preferred Best, but then two, let our audience know that taking your health seriously has financial benefits both in the insurance phase of life as well as overall long-term healthcare spending.
Tommy Blackburn: And probably more important than any of that: quality of life. Hopefully, long-term quality of life is what we’re ultimately trying to get at here, so that we can enjoy all the time, or as much of the time, that we have.
And as a little aside that hopefully the audience will find entertaining: the agent/broker that we were working with, John more or less put him on notice that he expected to get Preferred. And they were trying to set expectations, as they should, and it was like, “Well, we run the quote to start off with Best. If we get better, that’s wonderful. And honestly, John, sometimes I run it even lower, like maybe at a Standard rate just because I’m trying to set expectations there, John.”
And John was like, “Set expectations all you want. I’m getting Preferred Best. And it better not come back at anything other than that.” And they called, we were actually at that T3 conference. They reached out to me to give us an update, and they were like, “John will be happy to know he got Preferred Best just like he thought he would.” I think the agent was a little nervous if it came back as anything other than Preferred Best. So, it was comical to me that everybody was pleased that’s how it turned out.
John Mason: And we eat our own cooking, audience. So if you go back and you listen to—we’ll link it in the show notes—the podcast with Broc Buckles from BC (like Bravo Charlie) BC Brokerage.
Tommy Blackburn: That’s a good point.
John Mason: We did use them, and the process with life insurance may be, so we’re going to flip this a little bit. We talked about the term life insurance process and what that looks like. Let’s just go ahead, Tommy, and talk about that, and then we’ll kind of dive back into FEGLI. I think that’s a good lead-in anyhow, and that’s where we’re going. So the term life insurance process, Tommy, BC Brokerage did a fine job.
Tommy Blackburn: Yeah.
John Mason: Like, dealing with them? Really good experience. But dealing with life insurance in general—the only word that comes to mind is, forgive me, and it’s not a horrible word, audience, but I don’t want my six-year-old saying it: it sucks. Like, there’s just—dealing with life insurance is not a fun process.
Tommy Blackburn: “Miserable” was the word that comes to mind.
John Mason: Well, that’s better. That’s fine. Yeah. That’s more professional. That’s good.
Tommy Blackburn: Yeah. John and I have been through this rodeo. As you said, we eat our own cooking. We’ve been through it a couple of times throughout our lives, and not once have I ever enjoyed it, and sure enough, this time I didn’t enjoy it either. It is just, and so we get it, I guess. If we’re giving this advice, we know it’s painful to get life insurance in place.
You have to do these. I don’t know. It’s weird. You have to talk to the agent and basically give them all the info. Then the insurance company calls you, and you have to do it all over again. Why it had to be a phone call versus some other way to do it, I have no idea. Asking repetitive questions. It’ll try your patience, certainly. And then you get the privilege of most likely having to go do blood work, labs, poked, prodded, all that fun stuff that everybody looks forward to.
So it’s not pleasant. BC Brokerage took, I think, as much of the pain off of us as they could, and they were certainly helpful in advising us. And I’ll give them credit too. I was becoming a little annoyed, to put it politely. There was a lot going on on the calendar around that time. Part of it was we were getting ready to leave the country, and meanwhile, the insurance company is sending me auto-reminders constantly: “Hey, schedule this, do that. You’re in deep, deep trouble if you don’t hurry up and do this.” And it’s like, “I don’t know what you want from me. I’m leaving the country. Can’t do it right now.” And thankfully, they were able to get in touch with the insurance company and turn the reminders off, have them leave me alone until I got back. So again, they did a fine job, but it’s just—it’s not a pleasant process. That’s outside of their control.
John Mason: Agreed. So BC Brokerage, like, audience, if you want to apply for life insurance, you can go to their website. You submit like a term quote or something through them. Then they’ll schedule like a brief phone interview with you to ask you some medical questions. The reason they do that is that’s not medical underwriting; they just want to help you understand: are you Preferred, are you Standard, or Substandard? So there’s that part of it.
Then there’ll be a physical or electronic application with one of various carriers. It could be Pacific Life, it could be AIG, it could be a number of other carriers out there. So then you’ll submit that application, then the carrier’s going to ask you a bunch of the same questions that BC Brokerage asked you. And then if you’re like us and—for fun—go get a calcium score test on your heart, they’re going to want to know why you did that. Or, maybe this is TMI, but it’s like, “Hey, you did a stool test. How did that come back out?” I’m like, “Why did you do it?” It’s like, “Because I’m just curious and maintaining my health.”
So, the more proactive you are, also the more questions they’re going to ask.
Tommy Blackburn: The more difficult it is, yeah.
John Mason: And sometimes if you’re applying and you’re young, maybe you can go through accelerated underwriting and you’ll be approved in two to four weeks. If you’re a little bit older, maybe they’re going to make you do height, weight, blood, urine, and get those medical records. That could take maybe more like four to eight weeks or even 12 weeks to push this insurance application through.
So, the long and short of it: as quick as four weeks, maybe as long as 12 or 16 weeks to get this open to close. And we never drop anything, Tommy, before we have another policy in place. So that’s always very key for the audience to remember is if you have decided to replace FEGLI Option B, or frankly, if you have a term life insurance policy that you purchased maybe 5, 10, or 15 years ago, you might be surprised to see that insurance cost has come down over the last 10 or 15 years. You may be able to, maybe your health improved, maybe you quit smoking, maybe there’s a reason to go ahead and replace the existing term coverage that you have. Maybe you can extend it, keep the premium similar. All of those things go into the equation, but don’t drop anything before you have something new.
Tommy Blackburn: Absolutely. So hopefully, gives a good idea—people listening have probably been through it, and if not, we share in tha yes, it’s not pleasant, but it’s one of those necessary things. And maybe one day insurance companies will make this a better process because it certainly seems like it has room for improvement.
And I don’t know if it’s helpful for the audience too. John mentioned we’re doing this personally, which is true, so we personally went and got these things done, but we’re doing it through the business as well, through the firm. And I only share this because essentially it’s making sure that if something happens to us, the firm has the resources it needs to continue operating, buy our shares, take care of our families.
So I hope that’s actually an encouraging message for anybody listening that not only do we make sure we’re taking care of ourselves personally, but we’re trying to make sure that the firm is taken care of, that our clients are taken care of. So this recent process was about more than even just protecting, you know, our doing individual life insurance. This was about the bigger firm as a whole as well.
John Mason: That’s a good point, Tommy. So if we think about the operating agreement that talks about what happens when an owner passes away, having life insurance to fund a buy-sell portion of that is very important. Make sure the spouse is taken care of. Businesses don’t typically want to go into business with a spouse of a dead owner, so that’s the reason these things are in place.
And then just a quick tangent on estate planning: when you do your life insurance, the beneficiary should coordinate with your estate plan. So for instance, the beneficiary of these life insurance policies will be Mason & Associates. Mason receives the money, they buy out the spouse, and that’s what that money is used for. If you have a Rev Trust, maybe your life insurance policy beneficiary should be the Rev Trust. Maybe it probably shouldn’t be a four-year-old. So you just need to think about who you’re naming as the beneficiary. You also need to think about contingents, which these life insurance carriers are probably not great at making sure you’re thinking through.
And then the other tangent is: maybe you’re a federal employee and you have a business-owner spouse who maybe does or doesn’t have an operating agreement. Well, an operating agreement that specifies what happens if that person dies, whether it’s bank assets or who owns the company, think about that from an estate planning perspective, too. We’ve seen that recently with a client, Tommy, that it is important, even though it’s not required, to spell out what happens there if somebody dies, and that’s not typically taken care of just in normal documents.
Tommy Blackburn: It’s not. And I guess it’s like the materiality of the business. So sometimes you have a little side-hustle type of business that isn’t that material. Yeah, I understand you’re probably doing the bare minimum, went to the state, registered the LLC, took the default articles of organization. But the example you’re thinking of, John, or examples, are legitimate, going-concern businesses. They’re material. That’s what’s providing for the families. And yeah, in those cases, we certainly want to have it all buttoned up, and thankfully it is. So it just says, “Hey, when the owner—if something happens to the owner—the spouse is now empowered to essentially be the sole proprietor and have all rights, et cetera.”
John Mason: Nice. Thank you. So, two other things we’re going to link down in the resources below. There’s a website; it’s called termforsale.com. I think that’s an interesting website, audience. So if you’re curious what a term life insurance policy would look like for you—we’re not sponsoring them, and this is not an endorsement for them—but termforsale.com is a really easy place to go get a quick term life quote.
If you’re thinking about replacing FEGLI Option B, just run the quote at “Standard” or “Standard Plus.” Maybe you’ll get “Preferred” or “Preferred Best,” but if you run it at Standard, you may be shocked to see how competitive the Standard pricing is compared to Federal Employees’ Group Life Option B. Then it only gets better, Tommy, like you said, if you get Standard Plus, Preferred, or Preferred Best.
So we’ll link that in the show notes. We’ll also link to the FEGLI calculator, which is a phenomenal resource where you can put in things like, “What happens to my FEGLI at retirement?” and you can see what those premiums do. But it also shows you the cost of Federal Employees’ Group Life Option B, specifically Option B, what those premiums are in all of those five-year age brackets. So linking those two, I think, will be very beneficial for the audience.
Cool. So let’s just hit on Federal Employees’ Group Life Option B first. So Option B, Tommy, is not Basic. It’s frustrating to me that there’s a “B” in Basic, but Option B, audience, is one to five times your pay. So if you earn $100,000 a year, you can purchase up to five times your pay, or $500,000 of life insurance, under Federal Employees’ Group Life Option B.
Those premiums are bracketed: 50 to 54, there’s a cost; 55 to 59, it’s a higher cost; 60 to 64, even higher cost. So use that FEGLI calculator to show you how much you’re spending, and don’t forget, those premiums you’re paying are biweekly, so you have to multiply them times 26 and divide by 12 to see what that monthly cost is. It gets nasty.
So if you specifically are, like, 50 years old—I think that’s a good example, Tommy. If you’re 45 to 50 years old, planning to retire between 60 and 65, that is the prime time to look at replacing Federal Employees’ Group Life Option B with a 20-year level term. What are your thoughts on that? And maybe just elaborate a little bit more on what a 20-year level term is.
Tommy Blackburn: Yeah, sure. So I think you’re right. I think that is a great time because we’re going to see at that age, essentially, FEGLI Option B begin to get more and more expensive as we go through those next five-year brackets. And part of the reason is you’re part of a group, and this group is getting older in how they’re doing the premiums. And more or less, if you go out and you get individually underwritten, chances are you’re only doing that if you are of decent health. So now you’re removing yourself from the pool. This pool becomes more risky all of a sudden because we’ve got people who probably can’t go out and get a competitive individual policy. So therefore, that’s why these premiums are getting higher and higher with that FEGLI Option B.
20-year term: so this is… we have 20 years and, contrary to popular belief, I think, the policy doesn’t expire at the end of 20 years. What happens is the premium that you’re quoted, or that you initially get issued with this policy, it is level for 20 years. So let’s say it was $1,000 for easy math—$1,000 a year. You’re paying $1,000 a year for 20 years for that death benefit, call it, I don’t know, a million just for ease. And at the end of year 20, they’re going to send you a notice that says, “Hey, your premium just went 10X, so if you want to continue to keep the million dollars in force, you can pay us $10,000 a year, and it’s going to change every year hereafter.”
But that 20-year period is going to stay exactly the same. And one of the reasons we really like these level term policies is, as John laid out: “Hey, we’re 40, we’re 45.” That 20 years, well, that gets us to that goal of retirement. So we’re trying to say, “Here’s the period we need to insure while we continue to accumulate assets, accumulate a pension, and get to that point in time. After that, we don’t really need this. We know it’s going to get expensive, but we want it to be affordable and effective during that period.”
So that’s why we look at that level term. Hopefully, we hit FEGLI Option B a little bit. John, I know you want to shed some more light here. I was thinking if we have a moment, maybe sharing some instances where we’ve seen “let’s keep FEGLI Option B,” because I’ve thought about a couple of clients I know I’ve worked with where that was the answer. And the reason was that it wasn’t going to be favorable to go out onto the individual market and get a policy, or unrealistic.
John Mason: Well said, Tommy. FEGLI Option B is pretty competitive or inexpensive, or at least similar, probably under age 45 or under age 40. So a 22-year-old who wants $500,000 of insurance could likely get a similar premium with an individual term as they can Option B. And that’s the part that’s kind of sneaky. They don’t do it to sneakily trap you, but what ends up happening is you get trapped because the premiums are pretty affordable, and then they just start increasing and increasing, and increasing. And then all of a sudden, what also happens with our increase in age is we typically get less healthy, so then all of a sudden when this snowballs, maybe you’re in your worst health ever, and these premiums are getting crazy expensive.
So I just ran a Term4Sale and FEGLI calculator. So audience, for $500,000 of life insurance, age 50 to 54, Option B runs $108 per month. Fifty-five almost doubles to a $195. Any guess, Tommy, what it goes to at age 60? I know I’m putting you on the spot.
Tommy Blackburn: $450?
John Mason: Very… $433$ a month.
Tommy Blackburn: Nice.
John Mason: Yeah, that was great. $108 to $195 to $433 to $520 to $931 to $1,950 to $3,120. Now that takes you out over age 80, but clearly, you can see that’s expensive.
So when you look at Term4Sale, I plugged in “Standard Non-Smoker.” So if you are kind of like average good health and you’re a non-smoker, the premium is $113 a month, and that’s fixed for 20 years.
So you pay $5 more a month now than you would have under Federal Employees’ Group Life, but you’re saving big money for the 15 years after that. And then there are all sorts of benefits like conversion features and other reasons why you would think an individually written term policy gives you more options and more control.
So to your point, Tommy, when you’re young, it’s a really good, easy option. When you start to get older, it becomes more expensive. Why would you keep it? Well, you would keep Federal Employees’ Group Life if you decline survivor benefits on your military pension, if you are uninsurable, if you’re a smoker, or if you’re maybe a Type 1 or Type 2 diabetic. These are all things cancer survivor, these are all things that would preclude you from being individually underwritten for a term life insurance policy, and therefore Federal Employees’ Group Life may be your best option at that point. So just think about that in the context of your overall financial plan.
Now, this is also important, and we’re just going everywhere right now, which hopefully the audience thinks it’s fun too, is not every federal employee starts when they’re 22 years old. We met one yesterday who started federal employment 10 or 15 years into their career. There are some people that transition to federal employment in their 50s or even 60s. Well, the beautiful part about becoming a new employee—and this is true at a lot of big employers—is you can sign up for five times life insurance without asking any medical questions or answering any medical questions.
So think about that too, audience. You can be somebody’s hero. Somebody who’s a cancer survivor and a brand-new federal employee can sign up for six times their pay in life insurance with no medical underwriting. That’s a combination of five times Option B and Federal Employees’ Group Life Basic. If they work at Capital One or Huntington Ingalls, probably similar benefits there. No medical underwriting; five, six times or even more life insurance. So that’s another reason, Tommy, to really think about your group benefits when you’re beginning your employment. It could be huge.
Tommy Blackburn: Absolutely. Yeah, that’s a good point, and even for the younger federal employee who, you kind of said you get into the trap, which I agree with, because it’s convenient and not expensive at that moment. We know it will become so. But even for them, maybe it is like, “Hey, you just started.” Nobody wants to knock their paycheck down, particularly early in their career, but maybe it’s like, “Hey, just sign up for as much as you can get, and then go and get that individual policy in place, and then drop the FEGLI—the FEGLI B—back down or nix it at that point.” But we know you’re going to get the coverage in because you’re in that initial open enrollment window with no underwriting. So maybe just go ahead, get the max, and then we can adjust once we have some other information to work with.
John Mason: Life insurance is tricky because we’ve helped younger clients or children of clients who are in their early 20s or early 30s, and really, they don’t have any insurance needs yet.
Tommy Blackburn: That’s true. Yeah.
John Mason: And it’s like, “Well, why would I waste money?” Well, at some point, you just kind of protect your insurability because maybe you do get married, maybe you will have kids, maybe one day you will own a home, and you’re not promised tomorrow. I met somebody the other day who was, like, 35 years old and diagnosed with cancer. I have people in my life that I know that have heart conditions at under age 40 that aren’t found until they’re in their 30s. So you just never know. Bad genes, genetics, what have you, you could end up needing that insurance. And if you don’t, like Tommy said, take advantage of it when you begin your employment, you didn’t protect your insurability, and therefore, right at the time you need the insurance, you may find out you’re not eligible for it, and that puts your family in a really difficult spot.
I think we’d rather you waste some money and protect your insurability, because we’re not talking huge dollars either.
Tommy Blackburn: And that’s the point. When you’re young, it’s usually pretty affordable because chances are you have a lot of time left, so they don’t think the probability is that high that something’s going to actually happen to you, so they’ll issue those premiums pretty low.
And John and I, we understand we’re weird animals, but again, going back to eating your own cooking, taking your own medicine here, John and I both, I know we did this. Like, when we were earlier in our lives, earlier in our careers, we both went out and got life insurance before we really had a need for it. And I think for both of us, we probably were in serious relationships, kind of had an idea of like, “Hey, I think I’m going to have a family. I can see I’m going to have… most likely have a spouse. None of it is in place at this point, but it just seems like I’m heading in this direction, so I’m going to go ahead and get this done now,” because there is no time like today. So for whatever it’s worth, again, we took our own medicine there.
John Mason: Tommy, thank you for sharing that. And we’re going to take a quick commercial break here. We just want to highlight a few things. Don’t forget to check out federalemployeefinancialplanning.com. That’s a specific website that we do for this podcast and our YouTube channel. Masonllc.net was also revamped somewhat recently in 2025, and we have an e-book on survivor benefits that’s coming your way shortly.
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Jumping back into the episode, Tommy, I think we’ve done a really good job hitting on FEGLI, but now I want to talk a little bit briefly about when you retire. So we’re kind of going out of order here, but when you retire with Federal Employees’ Group Life Insurance, you have a few options. Rather than talk about all of them—because we’ve done that before, we’ll link to some YouTube videos where we talk about these—the one that’s really hot on my mind right now is the 100% reduction at retirement, specifically talking about Federal Employees’ Group Life Option B.
It’s pretty common for us to see somebody in their 62 to 65 timeframe who has been carrying Option B because they thought it was the responsible thing. What are the considerations and what do we do specifically as somebody who’s getting closer to age 65?
Tommy Blackburn: Well, I think at that point, essentially where we’re going is you’ve been paying for this, you’ve been carrying it, and now we have this 100% reduction option. So what that says is we’re going to stop paying for it. It’s going to begin reducing down to 0%. And it’s just kind of like, well, so my other option is I could just drop it and it goes away immediately, or I can take the, “Hey, let’s let it slowly phase down here,” and at least I get a little bit of runway, as I’ve been paying for it.
John Mason: Yeah, 50 months of free coverage, right? So if you’re 64 and 11 months and you’re retiring, it would be a pretty big mistake just to drop Federal Employees’ Group Life Option B. That would kind of be silly because one month from now, you have a declining term over 50 months at no cost to you. So it gets harder at age 60 because then you’re committing to those premiums for five years.
But the closer and closer you get to 65, the recommendation is likely: keep paying those premiums, elect that 100% reduction at retirement. That’s a good option. And similar to, like, 62, right? You wouldn’t retire at 61 years and 11 months and miss—
Tommy Blackburn: And not get 1.1%
John Mason: And miss the 1.1%
Tommy Blackburn: Yeah.
John Mason: You would never do that. Well, similar with your FEGLI B, don’t just drop it at 64 and 11 months; 100% reduction. And we’ll link to those videos, but you can drop it. You can elect the 100% reduction, and because you have five multiples, Tommy, you can make or break these decisions on each multiple. So it’s not an all-or-nothing. You actually get to look at each multiple and select what you want to do.
Tommy Blackburn: That’s great information, yeah, for people just to be aware of as you’re making these decisions as you’re approaching them. You have options.
John Mason: So quick hits: Option A is $10,000, so that’s $10,000 of life insurance at 65. Typically, what happens is the 75% reduction, so that $10,000 reduces down to $2,500. You have your Federal Employees’ Group Life Basic, which is your salary rounded up to the next thousand plus $2,000 on top of it. So $99,500 rounds to $102,000 of life insurance.
Overwhelmingly the most popular option at retirement, audience, is the 75% reduction, which is no premium to you once you reach age 65, and that $100 K reduces down to $25 K. Federal Employees’ Group Life Basic is interesting, Tommy, because when you’re young—and I don’t remember, I think it’s below 45. Maybe you can fact-check me—
Tommy Blackburn: That was… yeah, that was where my head was going to go, was below 45.
John Mason: Yeah, I think it’s below 45. Yeah, it is. Below 45, you actually get two times your pay in Federal Employees’ Group Life Basic, and then it starts reducing down to one times your pay at age 45. But it’s expensive. Relative on a cost-per-thousand basis, Federal Employees’ Group Life Basic is actually decently expensive, because it’s the same cost per thousand whether you’re 45 or 75.
But we tend to like it because you get that free, or like paid-up insurance at 65. So it’s not the best deal in town, but generally speaking, we see our clients have it. Most of our clients are in or near retirement, so they’ve already paid for it their entire career. I guess you could make a case for a 25 or 35-year-old that 20, 30, or 40 years of FEGLI Basic premiums isn’t ideal, but this is not a catastrophic thing to keep. Most of our clients have it and do that reduction at retirement.
Tommy Blackburn: Which I like the way you framed it. Like, here’s the reality: most of the time people have it, we’re already deep into it, so at this point, it just makes sense to ride it out until we get that 75% reduction.
John Mason: And then finally, the other option is Option C, which is your family coverage. So that could be up to $25,000 for a spouse or $12,500 for a child. Important to understand those premiums are bracketed similar to FEGLI Option B. So you’re buying less insurance, so the premiums are less offensive, but on a cost-per-thousand basis, they’re just as offensive.
Tommy Blackburn: Right.
John Mason: It just gets kind of sneaky there because you’re not buying $500,000, you’re buying $25 K. The more kids you have, the better the deal. If you could have multiple spouses and multiple kids, well, FEGLI Option C is pretty affordable maybe at that point. But then when kids age out and you’re down to protecting only a spouse, FEGLI Option C doesn’t tend to be something that we’re carrying into retirement.
Tommy Blackburn: Yes, I agree. Yeah, and I feel like a lot of times we do see that where it’s like: well, the kids are grown, independent, doing their own thing successfully. This coverage maybe never made sense to begin with, and it certainly doesn’t now.
John Mason: So I guess some other things popping into my head, Tommy, that we can talk about here is in order to maintain FEGLI Basic into retirement, you have to have it for five years. So yes, you could have enrolled in FEGLI when you began your career. You can also enroll in FEGLI Basic anytime, or Federal Employees’ Group Life Option B anytime, but you do have to go through medical underwriting if you’re not in your initial launch of your career. So keep that in mind is you do have to satisfy that five-year rule. It can be applied for anytime. I would imagine if you’re going to go through underwriting that you would probably try out—
Tommy Blackburn: Shopping.
John Mason: Yeah.
Tommy Blackburn: Yeah.
John Mason: LLIS or BC Brokerage—go shop it with, or even your standard home and auto insurance carrier, before you commit to Federal Employees’ Group Life Option B.
Tommy Blackburn: One of the things that you mentioned, the home and auto carrier. The reason we throw out LLIS and BC Brokerage: not only do they work, they specialize in working with advisors such as ourselves, so they have good relationships with us. The other part is that they’re not captive, so they’re going to shop: “Here’s everybody that does life insurance that’s well-rated, based upon those questions that you answered for me. Here’s the one that looks like they’re going to fit your situation best.” Not always the case, but sometimes with like a home and auto that’s captive, so like if you’re with Allstate, chances are the Allstate agent is only going to show you Allstate life insurance products. It’s not always true, but this is one of the reasons we like having a broker like a BC Brokerage or an LLIS.
John Mason: How about, Tommy, “buy term and invest the difference”? And maybe we can just talk a little bit about like a whole life or universal life as well, because that’s a danger, right? When you start leaving your group life insurance and you go see an insurance agent—
Tommy Blackburn: Oh, yes.
John Mason: The danger is that maybe you are sold or marketed a product like these really sexy IULs that can not only protect your family but generate tax-free retirement income and also take you to Mars one day, and they solve all the world’s problems. Nobody’s going to be hungry anymore; world peace has been achieved because you bought this policy. Thoughts?
Tommy Blackburn: Yeah. It’s going to save you from AI. It’ll be the AI. Yeah, it’ll do everything for you.
John Mason: Oh, even if you buy this, Congress will get their act together and start passing legislation to reopen TSA and all the things and take care—
Tommy Blackburn: There you go…
John Mason: …of the people that… yeah, if you do this, it fixes all the world’s problems.
Tommy Blackburn: It’s a magical elixir that I have for you. You just gotta pay me the premiums. Yeah, I’m sure as you can gather, John and I are not huge fans of a lot of these cash-value, more expensive, complicated policies where we’re trying to accomplish many different things inside of this insurance wrapper.
We generally view—and again, this is general, there are cases to be made where those products could make sense—but in general, we want our insurance to be our insurance. Let’s keep it as cost-effective as possible, probably as least sexy as possible, which is your term life insurance generally. But it’s far more affordable, and it’s just, again, goes back to: “Hey, I need to get through this next 20 to 30 years where I can save, and I can get that pension or whatever it is that I’m accomplishing over my career.” I just need to insure this risk while I’m going through time, and it’s the most cost-effective way to do it.
Whereas, yeah, then when we start getting sold much more expensive products with lock-ins that are called surrender periods, where, hey, if you change your mind, well, you only get 90% of whatever you put into it back—these other options, they tend to be expensive and tend to take a lot more cash from you so that you’re not investing in more efficient ways to invest.
So that’s generally our take. Yeah, whole life insurance you probably don’t need—going back to that 20 to 30 year, like, you don’t really need to be insured your whole life, which is why it’s called “whole life” insurance. It’s just: I need to be insured throughout my career. Yes, it has a savings component that can accumulate, but we would say—argue that, in general—you’re going to do far better if you have low-cost, effective life insurance (AKA term) and if you have low-cost, effective investments that are focusing on investments. So it’s kinda like let each specialized tool be the specialized tool for that purpose instead of trying to have the Swiss Army knife that’s probably not good at any of them.
John Mason: Well, one of our favorite sayings, Tommy, is: “If you can afford to retire, you can likely afford to die.” And keep in mind, audience, that term life insurance is designed for when you have a young family and you need as much insurance as you can for as cheap as possible, right?
Let’s just throw out an example. If $100$ buys you a $500,000 term life, $100 may only buy you a $50,000 whole life. Well, if you die at 35 years old, you need that $500,000 of insurance. That whole life was not that beneficial to you because you had $450,000 less money passed to your spouse and to your children. So we need as much insurance as we can get early for as cheap as possible.
Hopefully by retirement, you’re like one of our clients who has saved a lot, done a lot, accrued a big pension. We don’t necessarily need lump-sum insurance in retirement. We switch more to income-replacement life insurance at retirement, which is—drum roll—survivor benefits, baby. That’s it. So if we know that we’re going to take survivor benefits at retirement, and we know that at 35 or 40 it’s really easy to buy a million or a million five term life insurance policy… because we know at retirement we’re going to have a big TSP, maybe our house is paid off, and without medical underwriting, we can elect full survivor benefits at retirement. We don’t really need whole life insurance, guys, because you already have that with survivor benefits. That is your whole life. We need you to work your entire career to accrue that massive benefit.
Tommy Blackburn: Mm-hmm. Or you also have Social Security, you have your investments. So even if you’re not federal and you don’t have that pension with a survivor benefit, you still will have accumulated assets. You will have Social Security, which has a survivor element to it—a major survivor element to it. So that’s again, it’s just: we need to get through time, and the most efficient way when we get to that other part of time is by keeping costs low on the things we can keep low.
John Mason: Preferred issue when you need it, which is at retirement with pre-tax dollars, which Virginia and other states maybe are increasing taxes. So as taxes go up, survivor benefit premiums go down, or net premiums go down effectively.
Tommy Blackburn: Yeah.
John Mason: So it’s a wonderful deal, audience, and the earlier you commit to it, it changes how you plan. If you wait to make that SBP decision until you retire, maybe you wasted money on permanent insurance and didn’t have the right insurance along the way. And just keep in mind, too, that you’re going to grow into these policies, right?
So maybe you work with a 25 or 30-year-old. They probably want a million-dollar life insurance policy. Maybe they don’t need it now, but throw a house and a kid into the mix, and all of a sudden they’re underinsured. So one, one and a half, or even two million—it’s kind of like mind-boggling, Tommy. It’s a lot of money.
Tommy Blackburn: Yeah, but to just throw it around so flippantly. But I want to say—
John Mason: But you grow into it fast…
Tommy Blackburn: You do. I’m on the same page as you. And sometimes it’s funny because you can do many different ways of analyzing this, of “how much insurance do you need?” And I can try to nail it down to the penny through one of these various methods, or experience in life just has kind of taught us—it’s like you just need to get at least a million. Maybe you need two. And the price there, again, like, why are we trying to nail this down to the penny? This is, John kind of led in with the whole life versus the term life costs. It is so cost-effective. Like, we’re looking at a minimum of a million. Let’s just come out the gate there. You’re going to get at least a million. And then maybe two million even makes sense. But we don’t need to overanalyze this.
John Mason: Another example—another one of our favorite sayings is: “Don’t let perfect get in the way of good enough.” Maybe you do a life insurance analyzer and it says you need $1,350,225.46. 1.5 is probably going to do you okay.
Tommy Blackburn: Yeah. Or, John, we can start layering this, right? I forget what the technical term is, but we’ll have them expiring at different times. And because the need—which is true—the need does come down generally as we go through our career and accumulate assets. Or we can just get the 30-year term or 20-year, whatever makes sense here, and call it a day and probably get back to about the same answer.
John Mason: If you’re studying for the CFP exam or going to college, maybe you need to do that. But there’s also a difference in taking it from textbook to reality. And I can tell you that I’ve never met one client that wants to update five different beneficiary forms for five different insurance policies that have five different maturities and five different premiums and five different things. Like, practically speaking, it’s one insurance app with one set of beneficiary forms and one bank draft. That’s what people want.
Tommy Blackburn: Yeah.
John Mason: And if you want something more complicated, good on you, but we don’t see that very often.
Tommy Blackburn: Well, yeah, you think about too from, like, a life perspective. I think that stuff sounds really cool when you’re younger. You’re like, “Oh, I’ve got this really complex strategy, and I’ve got it down. Only I’ve got it down.” Where… and then as you go through life, you’re like, “This is terrible, all of this complexity.” Like, can we just have one simple answer here? So just a little bit of, again, practical: there’s the book answer, and then there’s “don’t let perfect get in the way of good enough.”
John Mason: One last tangent from me, and then I want to hear any closing thoughts that you have, Tommy. When I did my first version of my estate plan, I thought it was cool to put in pet trusts and drug and alcohol provisions, and if it was there—I don’t even own a gun. I think I have a gun trust section in my trust. It’s like—
Tommy Blackburn: You checked every box…
John Mason: I’m going to throw everything in here because this is just—this really is a cool document. Well, now at 38 years old, I’m like, “You know what would be really great? If I had a three-page trust that I could understand.”
Tommy Blackburn: Exactly. Yeah.
John Mason: So that’s just another example
Tommy Blackburn: That’s life experience. Yeah, I agree. Yeah, it only needs to say what it needs to say that’s applicable to us, make it easy for somebody to administer, understand, work with it. Yeah, simplicity. And it’s somewhat of another saying of ours—I don’t know if it is an actual saying yet—but let things be as complicated as they need to be, but absolutely no more. In other words, keep it as simple as we can.
John Mason: I love it, man. Any closing thoughts?
Tommy Blackburn: No, I really enjoyed it. Looking forward to… we’ve got that webinar coming up. This’ll air by the time the webinar kicks off, but hopefully it inspires people to sign up, participate. We’ll have more of those events; that is certainly the plan. Really enjoyed the episode.
John Mason: Thanks, Tommy. Appreciate it. Audience, remember, we’re financial planners first, and we do this content creation second. We hope you leave this episode and every episode feeling educated and empowered to make positive changes in your financial plan. Thank you for hanging out with us on another episode of the Federal Employee Financial Planning Podcast.
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