What is a QLAC?
Jason Stolz CLTC, CRPC
Over 100 Carriers to Quote From. Here are a few of them!
What is a QLAC? A QLAC—short for Qualified Longevity Annuity Contract—is a type of deferred income annuity you purchase with pre-tax retirement dollars (IRA/401(k)) to create a guaranteed lifetime paycheck later in life (often starting in your late 70s or early 80s). The key benefit: the dollars you place into a QLAC are excluded from Required Minimum Distribution (RMD) calculations until income begins. That can reduce taxable income in your early retirement years while securing a “backstop” paycheck for longevity risk.
At Diversified Insurance Brokers, we compare QLAC quotes across many highly rated carriers and help you decide how a QLAC fits with your other retirement income tools—like fixed and fixed indexed annuities, lifetime income strategies, and claiming decisions for Social Security. If you’re rolling funds from an old plan, see our guide on best annuities for 401(k) rollovers.
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How a QLAC Works (Plain-English Walkthrough)
- Fund with qualified dollars: Move money from your IRA or eligible plan into a QLAC. These funds are then excluded from RMD calculations until income starts.
- Choose a future start age: You can defer your income to a chosen age—often as late as 85—to maximize longevity protection and generally higher payouts.
- Pick single or joint life: Protect one life or two. Joint-life designs can continue benefits for a spouse.
- Customize protections: Add period-certain guarantees or death benefits (varies by product) for heirs.
- Turn on income: At your chosen date, the QLAC pays a guaranteed monthly/annual paycheck—no market risk, no sequence-of-returns worry.
Why Retirees Use QLACs
- Tax timing: Reduces RMDs in your early 70s by carving out a QLAC portion to start later.
- Longevity hedge: Creates a backstop paycheck if you live into your 80s/90s.
- Simplified planning: Know a portion of income is guaranteed for life—coordinate the rest with annuity basics or annuity vs. 401(k) comparisons.
- Spousal protection: Joint-life options can cover two lifetimes. For more, see best annuity for guaranteed income in retirement.
QLAC vs. Other Income Annuities (SPIA, DIA) & Accumulation Annuities (MYGA, FIA)
| Feature | QLAC | SPIA | DIA | MYGA | FIA + Income Rider |
|---|---|---|---|---|---|
| Funding | Qualified funds (IRA/401k) | Any (qualified or non) | Any (qualified or non) | Any (qualified or non) | Any (qualified or non) |
| RMD Deferral | Yes (QLAC carve-out) | No | No (unless structured as QLAC) | No | No |
| Income Start | Later (up to age 85) | Immediate | Deferred (flexible) | Withdrawals anytime; no lifetime income unless annuitized | Deferred; lifetime income via rider |
| Primary Use | Longevity income + tax timing | Instant paycheck | Future paycheck | Safe growth at fixed rate | Growth with downside protection & income rider |
Want to compare payout power across balances? Explore “How Much Does a … Pay?” pages: $1M, $3M, $5M, $10M.
Design Choices That Drive QLAC Payouts
- Start Age: The later you start (e.g., 80 vs. 75), the higher the income per dollar.
- Single vs. Joint: Joint-life covers two lives; payouts are typically lower to reflect longer coverage.
- Period Certain / Refund: Guarantees for heirs reduce payout slightly but add estate value.
- Premium Size: Larger contributions produce larger guaranteed income.
Coordinating a QLAC with the Rest of Your Plan
A QLAC is rarely the only tool. Many clients blend:
- Near-term income: A SPIA or income annuity for checks now + a QLAC for checks later.
- Safe accumulation: A MYGA (multi-year guaranteed annuity) for principal protection and predictable growth.
- Upside potential: A fixed indexed annuity with income rider for growth with downside protection.
- Rollover logistics: Review 401(k)→annuity rollover best practices and use our Retirement Account Locator if you’ve lost track of old plans.
Example Scenarios
- Tax Smoothing (Age 73): You expect high RMDs and don’t need all the cash. A QLAC carves out a portion, lowering current RMDs while securing income at 80. Coordinate with Social Security timing for cumulative lifetime benefits.
- Couple’s Backstop (Early 70s): You implement a joint-life QLAC at 72, begin income at 82. Combine with a fixed annuity ladder for mid-term needs and a FIA for growth.
- Legacy Conscious: You add a refund/period-certain feature so heirs receive value if you pass away before or early into income.
Lifetime Income Calculator
Then compare with our current annuity rates and highest guaranteed payout pages.
Get a Personalized QLAC Illustration
We’ll model start ages (70–85), single vs. joint, and refund options—side by side.
Request My QLAC PlanRelated Pages
- Annuities 101
- Current Income Annuity Rates
- Current Fixed Annuity Rates
- Annuity vs 401(k): Which Is Better?
- Best Annuities for 401(k) Rollover
- Why Work With Us (YouTube)
Talk to an Annuity Professional
We’ll coordinate your QLAC with annuities, Social Security, and RMD timing—so everything clicks.
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FAQs: Qualified Longevity Annuity Contracts (QLACs)
How much can I put into a QLAC?
Current IRS rules allow up to $200,000 (indexed for inflation) of qualified funds to be used for a QLAC. We’ll confirm the current cap when we quote.
When can QLAC income begin?
You choose a start age—often anywhere from your 70s up to age 85. The later the start, the higher the income per dollar.
Do QLACs reduce RMDs?
Yes. The amount you allocate to a QLAC is excluded from RMD calculations until income begins, which can lower taxes in early retirement.
What happens if I pass away early?
Many QLACs offer refund or period-certain options so beneficiaries receive value. We’ll model those trade-offs for you.
