FEHB and Retirement in 2025: How to Keep Your Coverage, Manage Premiums, and Coordinate with Medicare

If you’re a federal employee or retiree, FEHB and retirement go hand in hand. In 2025, though, the conversation feels more urgent. FEHB premiums are rising faster than pay and COLAs, and many feds are trying to decide how Medicare fits into the picture once they leave federal service.

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If you’re a federal employee or retiree, FEHB and retirement go hand in hand. In 2025, though, the conversation feels more urgent. FEHB premiums are rising faster than pay and COLAs, and many feds are trying to decide how Medicare fits into the picture once they leave federal service.

This guide walks through:

• How to qualify to keep FEHB in retirement
  
  
• What 2025 FEHB premium increases mean for your future budget
  
  
• How FEHB in retirement and Medicare can work together—without overpaying for coverage you don’t use
  
  

1. FEHB eligibility in retirement: The rules you must get right

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Before you worry about which plan to choose, you have to clear one big hurdle: are you even eligible to keep FEHB in retirement?

OPM lays out three key conditions:

1. You must retire on an immediate annuity.
   
   
   • That typically means a regular CSRS or FERS retirement (including MRA+10 if you don’t postpone the annuity), disability retirement, or another qualifying immediate annuity not a deferred retirement that starts years later.
     
2. You must be covered by FEHB on the date of retirement.
   
   • You need to be actively enrolled in an FEHB plan (or covered as a family member) right up to your retirement date.
     
3. You must meet the “5-year rule.”
   
   • You must have been enrolled in FEHB (or covered as a family member under FEHB) for the 5 years of service immediately before retirement, or for your whole period of service if less than 5 years.
     
   • You can switch plans and change enrollment types (Self Only, Self Plus One, Self & Family) during those 5 years; it still counts as continuous FEHB coverage.
     

If you don’t meet these requirements, you generally cannot carry FEHB into retirement, which can dramatically change your healthcare calculus.

Quick self-check:

• Have you been covered under FEHB (in any enrollment type) for at least the last 5 years?
• Are you planning an immediate annuity, not a deferred one? If the answer to either is “I’m not sure,” it’s time to clarify with HR or your agency benefits officer before you file retirement papers.
  
  

2. What FEHB looks like once you retire

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If you qualify, FEHB can be one of the most valuable benefits you carry into retirement.

Here’s what actually changes and what doesn’t:

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Who pays what?

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• The federal government continues to pay about 72% of the weighted average premium for FEHB plans, up to a maximum contribution.
• You typically pay around 25–28% of your chosen plan’s premium, the same percentage as an active employee, just deducted from your annuity instead of your paycheck.
  

So structurally, your cost share stays similar, but the dollar amounts can feel much heavier when you’re on a fixed income.

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The 2025 FEHB premium increase

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For the 2025 plan year:

• OPM reports an 11.2% average overall premium increase in FEHB.
• The enrollee share (what you pay) is rising by about 13.5% on average the biggest spike in more than a decade.
  
  

While exact numbers depend on your specific plan and enrollment type, the trend is clear: health insurance is taking a bigger bite out of federal paychecks and annuities.

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2026 outlook: More of the same pressure

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Early 2026 data and analysis suggest FEHB premiums will rise again, with total premiums up around 10% on average and another double-digit jump in enrollee contributions projected in some reporting.

For someone planning to retire in the next 1–3 years, it’s prudent to assume that:

• FEHB will remain a strong benefit, but
• Your share of premiums is likely to keep increasing faster than typical pay raises or COLAs.

That’s why budgeting for FEHB is now just as important as planning your TSP withdrawals or survivor benefits.

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3. FEHB and Medicare in retirement: How the pieces fit together

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Once you or your spouse turns 65, Medicare enters the picture. Many federal retirees will end up with both FEHB and Medicare, but the best combination isn’t the same for everyone.

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Who pays first: FEHB or Medicare?

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• While you’re still working and covered by FEHB as an active employee, FEHB is usually primary, and Medicare (if you enrolled) is secondary.
• Once you retire and are 65+, Medicare typically becomes primary, and FEHB becomes secondary.
  
  

This sequencing matters because secondary coverage often picks up deductibles, copays, and coinsurance left by the primary payer.

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Common coverage combinations

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1. FEHB only (no Medicare Part B)
   
   
   • You keep your FEHB plan and either:
     
     • Decline Medicare Part B, or
     • Delay enrolling in it.
       
       
   • Pros
     
     • No Part B premium (which can be significant, especially with IRMAA for higher incomes).
     • FEHB alone is comprehensive coverage.
       
       
   • Cons:
     
     • You rely solely on FEHB’s network and cost-sharing rules.
     • You may face higher out-of-pocket costs than if you had both FEHB and Medicare Part B.
       
       
2. FEHB + Medicare Part A only
   
   
   
   • Most people get Part A premium-free, so many enroll automatically at 65 even if still working.
     
   • Pros:
     
     • Extra hospital coverage at no additional monthly cost.
       
   • Cons:
     
     • Limited impact on routine doctor visits, prescriptions, etc., because Part A primarily covers inpatient care.
       
       
3. FEHB + Medicare Parts A & B
   
   
   • This is a common choice for federal retirees.
   • Medicare (A & B) becomes primary, FEHB becomes secondary.
     
     
   • Pros:
     
     • Very robust coverage; FEHB often covers Medicare’s deductibles and coinsurance, reducing out-of-pocket risk.
     • Some FEHB plans offer Part B premium rebates or incentives to enrollees who carry both.
       
   • Cons:
     
     • You pay both FEHB premiums and Part B premiums (plus IRMAA for high-income retirees).
       
       
4. Medicare Advantage and FEHB
   
   
   • Some retirees enroll in a Medicare Advantage (Part C) plan while maintaining FEHB.
     Certain FEHB plans are designed to work closely with Medicare Advantage and may offer enhanced benefits if you enroll.
   • In some cases, retirees choose to suspend (not cancel) FEHB if they enroll in a qualifying Medicare Advantage plan, retaining the option to come back to FEHB later. (Always confirm with OPM rules and your specific plan.)
     
     

4. Scenario-based guidance for FEHB in retirement

The “right” path depends a lot on age, timing, spouse/dependents, and income.

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Scenario 1: Retiring before 65

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If you plan to retire at, say, age 58–62:

• FEHB is your main bridge to Medicare.
• Your focus should be:
  
  • Locking in FEHB eligibility (5-year rule and immediate annuity).
  • Choosing a plan with manageable premiums given 2025’s increase and likely future bumps.
  • Ensuring your spouse and dependents are properly covered under Self Plus One or Self & Family if they rely on your FEHB.
    
    

Action steps:

• Confirm you meet (or will meet) the 5-year FEHB coverage rule by your retirement date.
• Model your net annuity after FEHB premiums include the 2025 increase and assume future rises.
• Revisit your FEHB plan during every Open Season leading up to retirement; a lower-premium plan might free up cash you’ll need once you’re off salary.
  
  

Scenario 2: Retiring at or after 65

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If you’ll be 65+ when you retire, you’re deciding both:

• How to keep FEHB in retirement, and
• What to do about Medicare Part B.
  
  

Typical patterns:

• Health-conscious, risk-averse retirees often favor FEHB + Medicare A & B for the most comprehensive coverage.
• Cost-sensitive retirees with modest healthcare usage sometimes keep FEHB only (plus Part A) and skip Part B to avoid the extra premium.
  
  

Action steps:

• Estimate your Part B premium, including any IRMAA surcharge if your income is above thresholds.
• Compare:
  
  • “FEHB only” expected out-of-pocket costs vs.
  • “FEHB + Part B” expected out-of-pocket plus Part B premiums.
• Check if your current or target FEHB plan offers Part B incentives some rebates meaningfully offset the Part B cost.
  
  

Scenario 3: Spouse or dependents relying on your FEHB

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If your spouse is younger than you or has their own health issues, FEHB can be a crucial safety net.

• You may need to keep Self Plus One or Self & Family coverage in retirement.
• Even if you eventually lean more on Medicare for your own care, FEHB may remain essential for your spouse or dependents, especially if they are not yet Medicare-eligible.
  
  

Action steps:

• Make sure your retirement and FEHB plan choice reflects family coverage needs, not just your own.
• Understand survivor benefit elections: if you want your spouse to keep FEHB after your death, you generally must elect a survivor annuity for them.
  
  

Scenario 4: High-income retiree worried about IRMAA

Suppose your income in retirement will be high (from pension, TSP withdrawals, other sources). In that case, you may face Medicare’s income-related monthly adjustment amount (IRMAA), which can add substantial surcharges to Part B (and Part D) premiums

In this case:

• The cost of FEHB + Part B can be quite high.
• It’s especially important to:
  
  • Compare total annual costs (FEHB premiums + Part B + IRMAA vs FEHB alone).
  • Consider whether a lower-premium FEHB plan plus Part B makes more sense than a high-premium plan plus Part B.
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5. Practical steps to prepare for FEHB in retirement

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Regardless of your scenario, here’s a checklist to help you move from theory to action.

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1–5+ years before retirement

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• Confirm eligibility now
  
  • Verify with your HR/benefits office that you:
    
    • Have (or will have) 5 years of continuous FEHB coverage, and
    • Are on track for an immediate annuity.
      
      
• Audit your current FEHB plan
  
  
  • Is it the best value given the 2025 premium increase and your health needs?
  • Consider whether you’re over-insured on things you don’t use, or under-insured where you do.
    
    
• Plan for inflation in healthcare
  

• In your retirement projections, assume FEHB premiums grow faster than COLAs recent years support that pattern.
  
  

The year before retirement

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• Time your retirement date carefully
  
  • Retiring early in the year versus late in the year can affect:
    
    • How many months of FEHB premiums are paid from salary vs annuity.
    • When Medicare and FEHB coordination kicks in if you’re 65+.
      
      
• Clarify your Medicare decision
  
  • Decide whether you’ll enroll in:
    
    • Part A only, or
    • Parts A & B when you retire (or at 65, if earlier).
  • If still working past 65, understand that FEHB remains primary until you retire.

FAQs

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Is FEHB better than Medicare in retirement?

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It’s not an either/or. For many federal retirees, the strongest approach is FEHB and Medicare working together. FEHB remains one of the richest employer-sponsored plans in the country, and Medicare especially Parts A & B can significantly reduce your out-of-pocket risk when used as primary coverage with FEHB as secondary.

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Do I have to enroll in Medicare Part B if I keep FEHB?

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No. There’s no requirement that you enroll in Part B to keep FEHB in retirement. Many retirees do enroll because of the additional protection and how their particular FEHB plan coordinates with Medicare, but others choose to rely on FEHB alone (plus premium-free Part A) to avoid the Part B premium.

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Can I drop FEHB later if I decide I only want Medicare?

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Yes, you can cancel or suspend FEHB in certain circumstances (for example, if you enroll in a Medicare Advantage plan with prescription coverage). But cancellation can be permanent, and the rules around suspension vs cancellation can be nuanced—always confirm with OPM or your retirement system before making a change.

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How bad is the FEHB premium increase in 2025 for retirees?

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On average, FEHB enrollees will pay about 13.5% more in 2025 for their share of health insurance premiums, following several years of above-inflation increases.
The actual impact on you depends on your specific plan and enrollment type, but retirees on fixed incomes will feel it acutely, which is why revisiting your plan choice and broader retirement budget is so important.

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What if I don’t meet the 5-year FEHB rule?

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If you retire without meeting the 5-year FEHB coverage requirement (and you weren’t covered under FEHB for your entire service if less than 5 years), you typically cannot continue FEHB in retirement. That usually pushes you toward relying on Medicare, other private coverage, or a spouse’s employer plan instead.

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