Qualified Longevity Annuity Contracts (QLACs)
A Qualified Longevity Annuity Contract (QLAC) is a special type of deferred income annuity designed specifically for retirement accounts like IRAs or 401(k)s. You contribute a portion of your savings today, and in return, receive guaranteed monthly income later in life—often starting at age 75 or 80. A key benefit: QLACs allow you to delay Required Minimum Distributions (RMDs) up to age 85, which may help reduce your taxable income during early retirement years.
QLACs are backed by the issuing insurance company’s claims-paying ability and are regulated under IRS rules to qualify for tax-deferral benefits.
Key Points
Delay RMDs, help reduce taxes
By moving a portion of your IRA or 401(k) into a QLAC, you can postpone RMDs on that amount until as late as age 85—helping to lower your taxable income in your 70s.
Guaranteed income for life
QLACs provide a dependable monthly income later in life, no matter how long you live. This could make them a powerful hedge against outliving your savings. (You cannot cancel a QLAC once you purchase it.)
IRS-approved limits
As of 2025, you can allocate up to $210,000 from qualifying retirement accounts into a QLAC. This limit is set by the IRS and is indexed to inflation.
Simple, contract-based structure
QLACs don’t depend on market performance. Once you purchase the contract, your future income is locked in based on your age, gender, and payout start date.
Spousal and survivor options
You can choose income for just your life or for both you and your spouse. Beneficiary options are available to ensure money isn’t lost if you pass away early.
No market exposure
QLACs are not investment products. There are no hidden costs, and your income is not affected by market downturns.
Additional Important Information
Timing matters
QLACs are typically more effective when used strategically in your 60s to prepare for income starting in your 70s or 80s—helping cover late-retirement expenses like healthcare.
Only with retirement accounts
QLACs can only be funded with qualified assets like IRAs or 401(k)s. They’re not available for Roth IRAs or regular brokerage accounts.
No RMDs until income begins
QLAC balances are excluded from RMD calculations until the income stream begins, which can potentially reduce tax burdens in early retirement years.
Choose a strong insurer
Since QLACs are long-term commitments, it’s crucial to choose a financially sound insurance company with strong ratings.
Coverage Summary
Feature
What to Expect
Typical Surrender Charge Periods
3, 5, 7, 10 years (longer term = higher rate)
Guarantees
Principal and credited interest; subject to insurer. Variable annuities are subject to market risk and may lose money.
Free-withdrawal allowance
Most contracts allow 10 % of the account value per year without surrender charge
Taxation
Interest taxed only when withdrawn; ordinary income rates apply. For annuities within a qualified plan, all withdrawals are fully taxable.
| Feature | What to Expect |
|---|---|
| Funding Source | Traditional IRA, 401(k), or similar retirement plan |
| IRS Contribution Limit | $210,000 (2025 limit; indexed for inflation ) |
| Start Date | Anytime between age 72 and 85 |
| Guarantees | Lifetime income and principal guarantees backed by insurer; no market exposure |
| Death Benefit | Optional; you can name a spouse or beneficiary to receive unused funds |
| Taxation | Income is taxed as ordinary income when received |
| Ideal Use-Cases | Reducing RMDs, delaying taxes, ensuring income in later retirement |
When might a QLAC annuity be a good choice?
A QLAC could be a good option if you want to lock in future income and reduce your tax burden today—especially if you're in your 60s or early 70s and have more saved in your IRA or 401(k) than you need for the near term.
In short, a QLAC can offer financial confidence for the later years of retirement while helping you stay in control of your income and tax planning now.
Some factors that may make it appropriate for you:
- You want to delay Required Minimum Distributions (RMDs) and the taxes that come with them.
- You worry about running out of money in your 80s or 90s and want a guaranteed backup income source.
- You have a long retirement horizon.
- You want a simple, contract-based solution—not another market-dependent investment.
- You’d like to ensure income for both yourself and a spouse, even if one of you lives much longer.
Bottom Line
A QLAC can help you buy time—delaying taxes today while locking in guaranteed income tomorrow, right when many retirees need it most.
Start Today
Ready To Experience Annuity Guidance That Feels Human?
No pressure, no strings attached—just honest, unbiased guidance to help you confidently make the right decision for your retirement.
Connect with us today!
Book Your Strategy Session
Get an Annuity Quote
Get a Second Opinion