QLAC Qualified Longevity Annuity Contract

Written by Hersh Stern Updated June 7, 2024

Postpone RMDs with a QLAC

Most retirees don't need to tap their Traditional IRA early in retirement but are forced to because of Required Minimum Distributions (RMDs). Once you reach RMD age, you must take money from your IRA each year. RMD age recently changed from 72 to 73, so check with a tax professional to find out what group you fall into.

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If you're in this situation and want to avoid taking some RMDs until later in retirement, there's an annuity that can do that for you. It's called a Qualifying Longevity Annuity Contract or QLAC for short (pronounced "cue-lack"). A QLAC is a deferred income annuity whose account value is free of RMDs until you're 85.

In this article I explain what a QLAC is, how it works, and how to set one up.

If you'd also like to get an instant QLAC calculation, simply enter your age, income start date, and amount to invest. Our QLAC Calculator is free, your phone number is not required, and your quotes are viewable online.

Unlocking the mysteries of a QLAC

What exactly is a QLAC?

A QLAC is a type of longevity annuity (also known as deferred income annuity). You set up a QLAC by transferring money from any of your existing IRA or 401k accounts to an insurance company annuity. Your QLAC is designed to pay you a steady monthly income later in life.

In July, 2014, the IRS approved the purchase of QLACs with pre-tax or so-called "qualified" account money.

Longevity annuities aren't new, they've been around for years. But the way the IRS now treats a longevity annuity within a tax-deferred retirement account, such as an IRA or 401(k), has changed.

QLAC Annuity

How a QLAC Annuity Works

Before we delve into the details, let’s first explain how a QLAC longevity annuity works. This is an annuity in which you pay a lump sum premium to an insurance company and then at a future date which you specify today, you begin receiving a guaranteed monthly payout amount that continues for as long as you (or your spouse) are alive.

The beauty of the longevity annuity is that the insurance company tells you today exactly how much income you will begin receiving in the future. There is no stock market or interest rate risk. The future income amount that’s quoted is guaranteed!

With a longevity annuity you get income security that starts in your old age and at an attractive price. Financial planners estimate that if you own a longevity annuity you can increase the amount you withdraw from your savings in the early years of retirement by as much as 30% because of the reassurance in knowing your income in later retirement is guaranteed by the annuity.

Another appeal of QLACs is that they are straightforward and transparent. They are easy to understand, they require only one upfront payment and have no annual fees.

No more RMD problems for Longevity Annuities

As I mentioned earlier, RMD is the acronym for Required Minimum Distributions.

RMD is the amount of money Uncle Sam requires you to withdraw each year from your Traditional IRA and other pre-tax accounts once you reach RMD age. The IRS makes you withdraw this money so it can be taxed. Typically RMDs are fully taxable and included in your taxable income.

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Recently, RMD age has increased from 72 to 73 with the SECURE Act. Make sure you know which age you have to start taking RMDs by speaking with a tax-professional.

Back in July 2014, the Treasury Department relaxed RMD rules a bit to encourage you to financially prepare for retirement. The new rules allow you to buy a QLAC with your IRA and not include the value of this QLAC annuity in your RMD calculations.

So, how can buying a QLAC reduce your income taxes?

Let’s assume you have a Traditional IRA and you invested the maximum allowable $200,000 into a QLAC with an income start date of age 80. If you did not buy a QLAC, that $200,000 would grow in value and when you reached RMD age, you'd have to withdraw your first RMD. Your RMD amount is fully taxable as income, obliging you to include the full amount in taxes.

But with a QLAC, you're allowed to omit this $200,000 from your RMD calculations. So the tax savings from not having to withdraw RMDs for close to 10 years could be quite significant. Of course an exact calculation of your tax savings would depend on how much your IRA account grew during and your income tax bracket.

By investing in the QLAC, you essentially postpone paying income tax on some of your IRA money.

How is your QLAC reported to the IRS?

Your insurance company is required to submit form 1098-Q to the IRS in order to report the status of your annuity as a Qualified Longevity Annuity Contract (QLAC). The insurance company is required to submit this form beginning with the first year in which premiums are paid, and ending with the earlier of the year in which the policyholder reaches age 85 or becomes deceased.

Once the income from your QLAC begins, you will receive a 1099-R from your insurance company. The 1099-R form reports the taxable income you've received from your QLAC.

Making sure your QLAC meets the requirements

While QLACs can be a powerful retirement planning tool, you want to be sure your QLAC is set up correctly. There are a few requirements listed below to help ensure your QLAC is valid.

Once you meet these requirements, your QLAC's premium can be exempt from your RMD calculations during the deferral period. Here is a summary of the most important features and requirements:

1. The maximum amount you can put in a QLAC is $200,000.

2. You can defer payouts only up to age 85.

3. QLACs cannot be invested in variable, multi-year guarantee, or index annuities.

4. Income can be Single Life or Joint Life, allowing you to protect a spouse with your QLAC.

5. Payout options are limited to Life Only or Life with Cash Refund.

6. Inflation adjustments may be available so long as the income you receive will meet with IRS guidelines.

How to buy a QLAC

Because QLACs are a relatively new product, a limited number of insurance companies offer them.

As of June, 2024, the following companies offer QLACs: Brighthouse Guardian Integrity Lincoln National Mass Mutual New York Life Pacific Life United of Omaha

It’s important to know that an annuity must be designed and labeled as a QLAC to qualify; buying a longevity annuity is not enough.

Regulators envision that most consumers will use only a fraction of their retirement savings for a QLAC and put the remainder towards other vehicles to generate retirement income before the QLAC starts paying out.

Beyond the QLAC basics

QLACs can also be used in more complicated annuity and financial planning strategies that are based on a concept called laddering in which you space out the maturity dates or dates on which income becomes available. The goal of these strategies is to diversify your portfolio and minimize interest rate risk. With staggered maturity dates that may stretch across years or decades, you can also plan for times when you anticipate needing more money such as for increased care or even to fund a purchase such as a retirement home.

Recap: Top 8 reasons to consider a QLAC

We’ve delved deep into the details of QLACs, so let’s recap some of the most compelling features:

1. Reduce taxes

2. Decrease RMDs

3. Plan future income

4. Enhance financial security for late retirement

5. Protect your savings from market downturns

6. No annual fees

7. Defer distributions

8. Possible benefits to spouses and other beneficiaries

QLACs are expected to become more popular and account for a larger share of annuities purchased because of the advantages discussed here. Does a QLAC sound like a good fit in your situation? Call us at 800-872-6684 for a free, no obligation conversation. We're here to help you.

+Additional Frequently Asked Questions About QLACs

You may be seeing the term QLAC and wonder if buying one would help you in retirement. Here are some of the most common questions our customers have about QLACs. If you want to learn more about QLACs and would like to discuss the idea further, we’re here to help with no pressure or obligation. Give us a call at 800-872-6684 or leave a question or comment on this page.

Q. What is a QLAC?

A QLAC stands for Qualified Longevity Annuity Contract. A QLAC is a new form of longevity annuity. A longevity annuity is an investment that you buy today and begins making payments to you later in your life, such as when you reach your 70s or 80s. The difference between a longevity annuity and a QLAC is that new government rules give QLACs more favorable tax treatment.

You can now buy a QLAC with pre-tax money from your IRA or 401k, and you can omit your QLAC from your Required Minimum Distributions calculations up until age 85. A QLAC may reduce your income taxes.

Q. What is my RMD?

Your Required Minimum Distribution is the amount of money you are required to withdraw each year from your IRA or other pre-tax accounts once you reach RMD age. Since you were allowed to grow this money pre-tax during your working years, the IRS makes you take RMDs so they can finally tax this money during your retirement. Your RMD withdrawals are included in your taxable income.

Q. What is a longevity annuity?

A longevity annuity is a contract you buy from an insurance company. It provides you with monthly income, often guaranteed for life, beginning at a future date. When you buy the annuity, you set the date you want your income to begin and the income amount is a contractual guarantee.

Q. What is different about a QLAC if it’s a longevity annuity?

A QLAC is a type of Longevity Annuity which allows you to defer taking RMDs on a portion of your Traditional IRA value. This can provide significant tax-advantages and guaranteed lifetime income. But not all longevity annuities are QLACs, so make sure you are buying the right type of annuity by speaking with an annuity expert. You can also get today's best QLAC rates by using the annuity calculator on our website.

Q. What specific changes make up a QLAC?

The main benefit of a QLAC is that you can defer taking RMDs on a portion of your Traditional IRA value up until age 85 and still meet required minimum distribution (RMD) rules! In other words, the premium you pay into your QLAC is not part of your RMD calculations.

Previously, you would have been required to include the value of your annuity for RMD calculations. That would put some people in a bind if they did not have enough liquid assets in other IRAs to meet their RMDs. Frequently, insuers won't even offer a longevity annuity (that is not a QLAC) that defers taking income from qualified funds past RMD age. QLACs changed this.

Q. Are there any restrictions for a QLAC?

Yes, there are certain restrictions:

1. You can only invest up to $200,000 in a QLAC.

2. You can only defer payments up to age 85.

3. Income payment options can cover either a single or joint life and can be either Life Only or Life with Cash Refund.

5. Period certain or term certain payment options are not allowed.

6. A commutation or cash surrender option is not allowed.

Q. Why should I consider a QLAC?

A QLAC can give you peace of mind so you're not worrying about outliving your money. It enables you to spend on such things as travel, a vacation home or hobbies in early retirement without worrying that you're hurting your long-term financial security.

A QLAC may be ideal for someone who does not have family to depend on in their advanced age and who doesn't want to worry about running out of money.

Anyone who worries about the cost of at-home, nursing, or assisted care and wants an extra level of assurance can use a QLAC to pay for their preferred living situation in their later years.

Q. What are the benefits or advantages of a QLAC?

A QLAC allows you to reduce your RMDs and defer withdrawals from your IRA to as late as age 85. Reducing your RMD withdrawals for even a few years could help you significantly extend your retirement savings.

A QLAC gives you income security when you get to an advanced age such as your late 70s or 80s. Because of the long period between when you buy the annuity and the annuity start date, the pricing can be very attractive.

Owning a QLAC can give you peace of mind to spend in your early retirement because you know that you have other resources in place if you live to an advanced age. It also offers you a way to plan for additional expenses or care you might need when you get to your later years.

Perhaps the biggest benefit is that a QLAC provides guaranteed lifetime payments. This income stream is not affected by the stock market, giving you an income stream you can rely on. This might even make you feel more comfortable being more aggressive with your other investments.

Q. What are the drawbacks or disadvantages of a QLAC?

A QLAC has some drawbacks. It isn’t as flexible as other assets that can be easily moved among asset classes such as stocks, bonds, or mutual funds if your circumstances or market conditions change. In fact, a QLAC is not liquid, so you won't be able to access the funds in your QLAC except through the income stream.

You may also face the risk that you might not get all of your money back if you die prematurely and selected a Life Only QLAC instead of a Cash Refund QLAC.

Finally, you are locking in your payments at the time your purchase your QLAC. In a low interest rate environment, the guaranteed monthly income amount may be lower than if interest rates were higher.

Q. Who should considering buying a QLAC?

A QLAC can be a good fit for many investors in different circumstances, so there is no one ideal buyer. A QLAC will work best if you have enough money to devote only a fraction of your Traditional IRA to a QLAC. You shouldn't get a QLAC if you don't think you'll have enough money in your early retirement years.

A QLAC is also more advantageous if you have some reason to think you have good longevity, such as a family history of living to an advanced age.

Q. How does a QLAC work?

A QLAC requires a single lump sum payment upfront. You elect your income start date when you buy your QLAC. You also know exactly what your annuity payments will be when you agree to the contract.

There are no ongoing fees. When you reach the annuity start date, you will begin receiving payments on the schedule you elected, typically monthly. To see how a QLAC would work in your circumstances, use the calculator at the top of this page. Just select your age, gender, how much you want to invest and an income start date. That will give you an idea of how much income you could expect to receive each month from your QLAC.

Q. How much could I save in taxes?

QLACs offer you the chance to reduce your income taxes in early retirement. Exactly how much you could save depends on a variety of factors such as your income tax bracket, the value of your Traditional IRA, and what a more traditional investments (stocks, bonds, mutual funds) could earn during your QLAC's deferral period. During your deferral period, your QLAC is not included in your RMD calculations, which can equate to significant tax savings. And the longer your defer starting your QLAC payments, the more you will receive on a monthly basis.

Q. What is the latest I can wait to start taking payments?

Payments must when you turn 85.

Q. Is there a minimum purchase age restriction?

Most companies will not issue a policy with a deferral period longer than a 40 years.

Q. Can I have more than one QLAC or longevity income annuity?

Yes. There are advantages to splitting QLACs or longevity annuities with different insurance companies and different income start dates. This can be a way to have income phase in at various points in time or to take advantage of interest rate changes. However, you cannot exceed $200,000 of premiums in all of your QLAC contract combined. Call an annuity expert at 800-872-6684 for more information.

Q. What death benefit options are available with a QLAC?

QLACs offer an optional “Cash Refund” feature, which must be selected at issue. This means that if you die before your annuity payments begin, your beneficiary receives a refund of the initial premium amount. If you die before you receive your premium payment back in full, your beneficiaries would receive the remaining balance.

Q. What payout options are available with a QLAC?

Your payout options are limited to the following - Single Life Only, Single Life with Cash Refund, Joint Life Only and Joint Life with Cash Refund. “Life Only” means once you pass away, payments end regardless of how much you've been paid. “Cash Refund” means that your premium will be returned to you either by you living long enough to receive it through your monthly QLAC payments, or if you die before that happens, your beneficiaries received the unpaid portion of your premium.

Q. What fees are there on QLACs?

There are no fees on QLACs. That is one of their attractions – they are straightforward, relatively easy to understand and entail no upfront or ongoing administrative fees.

Q. What is the maximum age I can buy a QLAC?

It varies by company, but a common restriction is that primary annuitants cannot be older than 83 and joint annuitants cannot be older than 90.

Q. Are Roth IRAs or Inherited IRAs eligible to be classified as a QLAC?

No. RMDs do not apply to Roth IRAs and inherited IRAs cannot be treated as QLACs.

Q. What if I make a mistake and put more money into a QLAC than the rules allow?

The rules have provisions that offer you some protection. Your annuity would still count as a QLAC if you return the excess premium, either in cash or in exchange for a non-QLAC annuity held in your retirement account. This must occur by the end of the calendar year following the calendar year in which you paid the excess premium. If you don’t return the excess premium by that deadline, then the entire annuity ceases to be a QLAC as of the date of the excess premium payment. If the excess goes toward a non-QLAC annuity, then the account balance must be increased to reflect that money for the purpose of calculating RMD. As you can see, it’s complicated, so you are far better off being very careful before you pay your premium than fixing a mistake later.

Q. What type of funding can I use to buy a QLACs?

While your maximum premium calculation must be based on your Traditional IRA value, you can use other pre-tax funds to purchase your QLAC, such as a 401(k) or 403(b).

Q. If it is a joint payout and the owner/annuitant dies prior to the annuity date, is the joint annuitant subject to the traditional RMD rules or do they get advantage of the later income start date?

They get the advantage of the later income start date.

Q. Is commutation, cash surrender or payment acceleration permitted with QLACs?

No. Commutation is a process allowed with some annuities by which you can terminate normal annuity payments and receive a lump sum distribution of the net present value. That and similar features like cash surrender and payment acceleration are not allowed with QLACs.

Q. Can a longevity annuity held in a retirement account be exchanged for a QLAC?

Yes. If an existing contract is exchanged for a contract that satisfies the QLAC requirements, the new contract will be treated as purchased on the date of the exchange. In such a case, the fair market value of the contract that is exchanged for a QLAC is treated as a premium that counts toward the QLAC limit. Executing such a move will depend on policies of the annuity issuer. For example, AIG, which introduced the first QLAC contract under the new rules, does not allow for these exchanges.

Q. Can money in an IRA that has begun distribution due to RMD rules be exchanged into a QLAC?

Yes. However, you should consult with a tax advisor to determine if a distribution must be made in order to satisfy RMD requirements for the calendar year of the purchase of the QLAC.

Q. If the QLAC owner dies prior to the annuity start date on a joint life QLAC, when must the joint annuitant start income payments?

For a spousal joint annuitant, the spouse must start income no later than the original annuity start date. For a non-spousal joint annuitant, income payments must begin by December 31 of the calendar year immediately following the calendar year of the owner’s death.

Q. Can a beneficiary roll over any death benefit proceeds?

If the owner’s death occurs before the owner’s required beginning date (RBD), the proceeds should be eligible for rollover. If the owner’s death occurs after the RBD, then the death benefit payment is treated as an RMD and not eligible for rollover. Similarly, if the surviving spouse’s death is after the RBD for the surviving spouse, then the death benefit payment is treated as an RMD and not eligible for rollover.

Q. What sort of reporting is involved with QLACs?

The IRS has said there will be a new Form 5498-A, Qualified Longevity Annuity Contract Information. It will be used by IRA custodians and company retirement plans to report QLAC information to the IRS and to you as the IRA owner. The form has not been finalized but you can see draft information here. The due date for reporting to the IRS and the owner is May 31.

Q. How will the QLAC payments I receive be taxed?

The QLAC regulations do not address taxation specifically, but experts in the field believe that taxation rules for contributions and distributions that would typically apply to a tax-qualified retirement vehicle would also apply for participants who are, or have, invested in a QLAC. This means that your payments would be taxed as income in the year that you receive them at the income tax rate that applies to your adjusted gross income, i.e. your regular tax bracket determined by your income.

More Coverage:

Qualified Longevity Annuity Contract Reduce RMDS To Extend Retirement Savings

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Comments (54)

  1. Mil
    2015-05-11 07:28:37

    Does the maximum premium apply to any one account or the sum total of all 401k and IRA accounts? If I had $250K in a 401K account and $500K in an IRA, what's the maximum that I could invest in a QLAC?

  2. Hersh Stern (ImmediateAnnuities.com)
    2015-05-11 07:29:39

    Hi Mil-

    Your investment in a QLAC is limited to the lesser of either $125,000 or 25% of all your qualified retirement plans and Traditional IRAs taken collectively (on an aggregate basis). So in your case the max amount would be $125k. Additionally, Roth IRAs cannot be treated as QLACs.


  3. Marilynn
    2015-05-15 14:08:13

    Can I purchase more than one QLAC? I'd like to buy a series of QLACs, one every few years.

  4. Hersh Stern (ImmediateAnnuities.com)
    2015-05-15 14:08:53

    Hi Marilynn,

    Yes, you can purchase more than one QLAC, as long as the total amount you invest in all your QLACs does not exceed the smaller of: (a) $125,000, or (b) 25% of your combined qualified plan (IRA, 401k, etc.) balances.


  5. Bill
    2015-06-02 11:56:38

    I inherited my mother's IRA as a rollover. Would this inherited IRA be eligible for QLAC in order to postpone the RMD requirement?

  6. Hersh Stern (ImmediateAnnuities.com)
    2015-06-02 11:57:53

    Hi Bill,

    The money in your inherited IRA is not eligible to fund a QLAC. The IRS regulations exclude inherited IRA monies.

    A deferred income annuity ("DIA") is somewhat like a QLAC and can be funded with your inherited IRA. However, a DIA does NOT delay the RMDs you'll need to withdraw from your inherited IRA.

    You can read more about deferred income annuities here:



  7. Joe
    2015-06-17 13:13:55

    If I buy a QLAC with a Return of Premium (ROP) death benefit would the money received by a beneficiary be treated as taxable income or as a non taxable payment similar to a life insurance death benefit?

  8. Hersh Stern (ImmediateAnnuities.com)
    2015-06-17 13:14:49

    Hi Joe,

    Since a QLAC is paid for with IRA or 401k money that has not been previously taxed, my opinion is that your beneficiary would owe income taxes on the lump sum death benefit. It should be treated as an inherited IRA. But please double check my opinion with a CPA or tax attorney (as I am neither) before you buy an annuity.


  9. John
    2015-07-16 14:17:34

    I am already taking RMDs. Can I purchase a QLAC now and exclude the QLAC $125k from further RMD calculations until I start taking the withdrawals from the QLAC?

  10. Hersh Stern (ImmediateAnnuities.com)
    2015-07-16 14:18:57

    Hi John-

    Yes, the Treasury allows you to buy a QLAC after even you've attained age 70-1/2. Most of the QLAC issuing companies also accept premiums up to age 80.


  11. James
    2015-08-03 09:37:59

    You state that there are no fees involved with buying a QLAC, why would an insurance company offer them? How much commission is involved or management charge?

  12. Hersh Stern (ImmediateAnnuities.com)
    2015-08-03 09:44:47

    Hi James-

    An insurance company certainly expects to earn some profit on its sale of a QLAC.

    How much profit it earns depends on its ability to predict the life expectancies of its policyholders plus its ability to invest safely yet also earn a return that's greater than its cost. An insurance company typically invests the premiums it receives from the sale of QLACs in a general portfolio of bonds, mortgages, and real estate.

    Say the company earns X% a year from its investments. From that amount it subtracts Y% which reflects its total operating, sales and marketing, investment, and other costs, plus a profit margin. The difference between X% minus Y% is approximately how much interest the company can credit on its annuities and other lines of business.

    Regarding annual fees -- QLACs are in the class of annuities called "fixed" annuities. Fixed annuities do not charge any management fees. QLACs are not like mutual funds or variable annuities where an annual account management fee may be fees are deducted.

    Regarding the agent's commission, I've written about this topic extensively here:


    Commission for the sale of a QLAC is similar to that for a Deferred Income annuity which is about 3% of the premium. However, this commission is already figured in your quotes. So the numbers you see at our website have the commission already deducted from them.


  13. Mil
    2015-09-08 09:55:02

    I'll soon be rolling over 401(k) funds at retirement. Is there a tax advantage to go with a QLAC vs. a regular deferred annuity? Assume $100K, retirement at 65 and annuity payout at age 80. Thanks in advance for your insights.

  14. Hersh Stern (ImmediateAnnuities.com)
    2015-09-08 09:56:32

    Hi Mil-

    First, I'd like to make sure I understood your question correctly. When you wrote "regular deferred annuity," did you mean the type of annuity that grows by a fixed interest rate each year for a set number of years (similar to a bank certificate of deposit)?

    If yes, then the QLAC provides a tax advantage not available with a regular deferred annuity. Only the QLAC will reduce the total amount subject to annual Required Minimum Distributions (RMDs) beginning when you reach age 70-1/2. For example, say you had an IRA with $400,000 and you decide to put $100,000 into a QLAC, then you will only need to withdraw RMDs from the remaining $300,000. This creates a tax savings.

    If you kept the entire $400k in a fixed deferred annuity, you would have to withdraw RMDs based on the entire $400k.


  15. Jane
    2015-09-14 13:41:05

    I thought you could always use IRA money to buy a deferred longevity annuity without any cap to the amount?

  16. Hersh Stern (ImmediateAnnuities.com)
    2015-09-14 13:42:00

    Hi Jane,

    Yes, that's still possible (within limits which I'll explain). You can invest almost unlimited amounts in longevity annuities as long as you leave enough non-annuity IRA money sufficient to cover your RMDs for the money in your annuities. Nothing's changed there.

    What's changed since July, 2014, is that you can now set aside up to $125k in a longevity annuity which meets the QLAC guidelines and forget about RMDs with respect to the premium in your annuity until you reach age 85.


  17. Wolfe
    2015-09-14 13:51:06

    Questions on answer to comment #14:

    x% - is x tied to some internal/external "market" index? if so, what is it?

    y% - can you tell me the typical range for y%?

    If the above %'s are dependent on the $ amount of QLAC, please assume $125k.

  18. Hersh Stern (ImmediateAnnuities.com)
    2015-09-14 13:51:27

    Hi Wolfe-

    The A. M. Best Company issues an annual report giving the X% or Net Yield for the major life insurance companies. Net Yield is defined as income from investments as a percentage of invested assets without taking into account capital gains or income taxes. Here's the latest data (2014) for some of the bigger companies:

    5.89% American General (AIG)

    3.49% Guardian Life

    4.64% MetLife

    4.25% New York Life

    5.53% Pacific Lice

    4.63% Principal Financial

    X% has been dropping for most companies as the yields on bonds and mortgages decreases.

    Y% (i.e., what percentage of its invested assets are spent by a typical company in overhead and operating its business) is more difficult to nail down.

    I'm guessing that would be in the neighborhood of 2%, give or take, across the companies' full book of business.

    Regarding the QLAC payout rates, those vary insignificantly between a $25k or $125k premium. Most companies apply rates which are proportional to the premium. So you won't necessarily get a better deal by spending more with any one company. In fact, that makes it easier for you to diversify and spread your risk across several companies, a strategy I mention to clients.


  19. Rebecca
    2015-10-15 08:05:03

    If I do not need the IRA minimum distribution advantage, is there any other reason a QLAC would be beneficial? I have heard that every dollar when paid out will be taxed. I have also heard there is another deferred annuity that can be about 2/3rds tax free when purchased outside an IRA. Is this true? Is it advantageous to purchase a deferred annuity from general savings rather than the QLAC??

  20. Hersh Stern (ImmediateAnnuities.com)
    2015-10-15 08:07:08

    Hi Rebecca-

    A QLAC is an annuity funded specifically with money coming from your IRA. Whenever you receive distributions from your IRA, whether discretionary withdrawals you take from time to time or controlled periodic distributions such as from an annuity funded with IRA money, taxes will need to be paid on the full amount you received.

    Now, there is an analogous product to a QLAC, that can be purchased with non-IRA money. It's called a "deferred income annuity." If you use our calculator and, instead of selecting IRA or 401k for "Tax Status," you select Savings, you'll see similar quotes but the taxable portion will be listed at around 2/3 less than the taxes owed on QLAC income.

    The reason QLACs are taxed at 100% is because you're receiving back IRA income that's never been taxed previously.

    The reason a ‘Savings' funded annuity is taxed 2/3 less is because the money you paid to the insurance company to buy that annuity was already taxed once before.

    The quotes themselves should be very close only the tax treatment is different because of the different sources funding each annuity.

    Regarding whether it's advantageous to buy one of these annuities with IRA or non-IRA money — I'd be happy to discuss this with you if you call me at 800-872-6684.


  21. Will
    2015-10-15 08:07:54

    I have a $60k variable annuity that matures in July 2016 that was purchased with IRA funds from Principal. Can I move that into a QLAC with no issues?

  22. Hersh Stern (ImmediateAnnuities.com)
    2015-10-15 08:09:01

    Hi Will-

    QLACs are limited to 25% of all your IRA money or $125k, whichever of these two measures is lower. So if you have a total of $240k in IRAs then you can set aside 25% of that amount, which is $60k, in a QLAC. Otherwise, if you have less than $240k in aggregate IRAs, you'll be limited to investing less than $60k in the QLAC.

    You may already know, too, that a QLAC cannot be invested in stocks. So you'll need to liquidate your "variable" annuity and transfer the proceeds to a QLAC annuity (which is a "fixed" not variable annuity). The transfer can be tax-free.

    When you're ready, contact our firm again and we'll help you sort it out and apply for the QLAC.


  23. Susann
    2015-10-20 11:50:20

    When calculating the 25% of all IRAs do you include Roths or only the IRAs subject to RMD? I have an annuity within an IRA that I'd like to convert to a QLAC. I have already been taking RMDs for a few years.

  24. Hersh Stern (ImmediateAnnuities.com)
    2015-10-20 11:50:44

    Hi Susann,

    You do not include your Roth IRA account balances when totaling how much you have in IRAs when calculating the 25% amount for a QLAC. That's because Roth IRAs are not subject to required minimum distributions.


  25. Penny
    2015-11-11 07:42:59

    I have $229,000 in a 401k. Can I take 25% of that amount and buy a QLAC ?

  26. Hersh Stern (ImmediateAnnuities.com)
    2015-11-11 07:43:36

    Hi Penny-

    Whether (or not) you can take an amount equal to 25% of the 401k and fund a QLAC will depend on whether (or not) you presently own a Traditional IRA equal to $229,000.

    You see, the key constraint on the amount you can invest in a QLAC is based on calculating 25% of your Traditional IRA balance, as December 31st of the prior year.

    So, if you don't presently have a Traditional IRA, you are unable to buy a QLAC. You must first roll over your 401k into a Traditional IRA (before year end) and then buy the QLAC next year.


  27. Tommy
    2015-11-16 07:09:49

    What's the earliest age I can purchase a qlac?

  28. Hersh Stern (ImmediateAnnuities.com)
    2015-11-16 07:10:37

    Hi Tommy--

    There's no age restriction in the tax code. However, the different insurance companies have set minimum ages. For example, New York Life allows you to purchase a QLAC as early as age 31. Pacific Life, on the other hand, requires that you are at least 52 years old. If you would like to see some QLAC quotes from a half dozen companies, please email me. I'd be happy to send them to you.


  29. Cam
    2015-12-07 14:33:16

    Are there QLACs with a residual value for kids if their parents die?

  30. Hersh Stern (ImmediateAnnuities.com)
    2015-12-07 14:33:52

    Hi Cam-

    Yes, one of the income options available with a QLAC is called a "Cash Refund" option. If the parents purchase an annuity with a Cash Refund, the premium is guaranteed to be paid back by the insurance carrier. If they parents pass away prior to payments beginning, the beneficiaries will receive a lump-sum refund of the entire premium. If the parents pass away after payments have started but before they received the entire premium back, the beneficiaries receive the remainder in a lump-sum.


  31. Jim
    2016-02-09 14:17:07

    My wife and I both have IRAs. Are we limited to only one QLAC per family, or could we each get one?

  32. Hersh Stern (ImmediateAnnuities.com)
    2016-02-09 14:17:43

    Hi Jim-

    You and your wife are each eligible to have your own QLACs. Each of your QLACs can be up to $125k, if that is no more than 25% of your individual IRAs. That means if you have $500k or more in your individual IRA you can move $125k of it into your QLAC. Similarly, if your wife has $500k or more in her individual IRA she can do the same.


  33. Robert
    2019-04-05 08:28:43

    I am trying to get a joint life quote for a QLAC IRA of $52,000, WA state male aged 61 with non-spouse beneficiary male aged 41. Is this available? Age 85 for the payout for me.

  34. Hersh Stern (ImmediateAnnuities.com)
    2019-04-05 08:29:14

    Unfortunately, all of our QLAC providers require that the joint annuitant be a spouse. Other than that, the rest of your parameters would be quotable.

    -Hersh Stern

  35. Hersh Stern (ImmediateAnnuities.com)
    2020-05-27 09:31:56


  36. John
    2022-03-15 15:12:20

    Just want to confirm … the max amount you can buy a qlac is for $135.000.

    This is not and annual amount ?

    Thank you

  37. Kyle (ImmediateAnnuities.com)
    2022-03-16 12:45:34

    Hi John,

    Actually, this year the QLAC limit was increased from $135,000 to $145,000. You'll see that reflected in our above article.

    This is currently the lifetime limit for a QLAC (not an annual limit). However, since their inception, the QLAC limit has already been increased three times, so there could be future increases as well.

    - Kyle

  38. Marilyn S.
    2023-01-12 11:36:34

    I have a QLAC that I purchased a few years ago. At the time, the maximum amt was $125,000. Now that it has been increased to $200K, can I add $75,000 to an existing QLAC or must I just buy another contract for $75.000?

  39. Kyle
    2023-01-12 13:54:02

    Hi Marilyn,

    Thank you for reaching out.

    You should be able to do either. Generally, you can add money to a QLAC up to about two years prior to the income start date. However, I would recommend checking with your insurance company to see what their rules are.

    It would also be wise to run quotes to see what a current $75,000 QLAC would get you. You might find that other companies have better rates than your current QLAC company.

    If you need assistance, please feel free to call us on our toll-free number, (800) 872-6684. We'll be very happy to help!

    Best regards.

  40. Jeffrey
    2023-02-07 09:30:35

    Hi Hersh,
    I'm a current customer with a 25 year immediate annuity already in place. It runs until age 85.

    I'm 70 this year and looking to open a QLAC prior to my RMD date (2026) primarily for tax purposes. I'm projecting a 401 value of $700,000 to $750,000 by then. I know there have been some recent changes in the law, I'd like more info on my options and look forward to hearing back from you on the matter

    thank you, Jeff

  41. Frank R.
    2023-02-20 11:17:48

    Is there a maximum age to purchase a Qlac. Or better stated can a 76 year Oldman buy a qulac?

  42. Kyle
    2023-02-21 08:43:25

    Hi Frank,

    Thank you for reaching out.

    You can absolutely still purchase a QLAC at age 76. You can delay the payments as far as age 85, so you'll still benefit from a few years of a reduced RMD.

    If you have remaining questions, please give us a call on our toll-free number, (800) 872-6684. We'll be very happy to help!

    Best regards,

  43. Nu
    2023-03-08 23:59:31

    How much could I invest in aQLAC for me and my husband with 260k in my 401k? ( My husband and I are retired.)
    Thank you,

  44. Kyle
    2023-03-09 14:15:39

    Hi Nu,

    The new QLAC rules allow for $200k to be used, regardless of your overall Traditional IRA balance. This has certainly simplified things for QLAC buyers.

    Best regards,

  45. Jon E.
    2023-05-08 14:14:10

    1. My wife and I each have 2 IRA's. Can any funds from MY IRA's be used to purchase a QLAC contract for HER - or must the contract be paid for solely from her IRA's?
    2. How about if a joint QLAC is purchased?
    3. Is there any cost to me if a QLAC is purchase through you? If not, I assume you receive a commission from the company we select?
    Thanks for your speedy reply!

  46. Kyle
    2023-05-09 17:05:09

    Hi Jon,

    Thank you for reaching out!

    I'm happy to answer your questions:
    1) The owner of the IRA being used to fund the annuity also has to be the owner of the QLAC
    2) You can name your spouse as a joint annuitant on a "joint life" QLAC
    3) There is no cost or fee for using our services. We are insurance agents, so we're compensated via commission from the insurance company you purchase your annuity through.

    If you have any additional questions, please feel free to call me on our toll-free number, (800) 872-6684. I'll be happy to help!

    Best regards,

  47. Chandrasekhar D.
    2023-06-03 13:44:23

    Can I
    1.Add a beneficiary for my QLAC?
    2.A dd death benefit for QLAC?

  48. Kyle
    2023-06-05 10:08:39

    Hi Chandrasekhar,

    Thank you for reaching out.

    The answer to both of your questions is "yes." You'll just need to add the "cash refund" feature to your QLAC.

    Best regards,


  49. Frank
    2023-12-04 15:14:43

    Can a QLAC be issued with a spouse as the sole annuitant?

  50. Kyle
    2023-12-04 17:41:35

    Hi Frank,

    Thank you for reaching out.

    Unfortunately, the owner of the IRA would have to be the sole annuitant on a "single life" QLAC. However, you could do a "joint life" QLAC and name your spouse as a joint annuitant.

    Best regards,

  51. Andrea
    2023-12-09 09:12:42

    Hi and thanks for this article! I was wondering what guarantees there are for QLACs if these companies offering them were to fail sometime in the next 30-50 years? Are they backed by the government in any way?

  52. Kyle
    2023-12-12 11:18:36

    Hi Andrea,

    Thank you for reaching out!

    Any coverage would be provided by your State Guaranty Association. Please visit your particular state's website at the following link:


    You can reach out to them directly by calling or emailing them. They should be able to provide specifics with regard to their coverage rules.

    Best regards,

  53. Keith
    2024-02-15 18:49:35

    I just need to be certain of this, if i transfer money from my pre tax traditional IRA, to a QLAC, I do not pay taxes on the amount transferred to the QLAC ?


  54. Kyle
    2024-02-16 12:03:29

    Hi Keith,

    Thank you for reaching out.

    Yes, you're correct. The QLAC will be funded via direct transfer from your Traditional IRA and it will not be a taxable event.

    Best regards,