Does a QLAC belong in your retirement plan?
Introducing a tool that can help you defer your RMDs and provide income later in life
Here’s the idea: you can use part of a traditional IRA or old 401(k) to buy a future paycheck that starts later in life and, until then, shrinks your required minimum distributions (RMDs).
What’s a QLAC, in plain English
A Qualified Longevity Annuity Contract (QLAC) is a deferred income annuity you buy inside a pre-tax retirement account.
You put in a chunk of IRA or employer-plan money now.
The insurance company promises you a monthly check that begins at a date you choose—any time up to age 85.
Until those checks start, the amount you used to buy the QLAC isn’t counted in your RMD math.
So your RMDs are lower in those years.
Key limits for 2025: you can put in up to $210,000 total per person across all eligible accounts over your lifetime.
That cap is indexed for inflation.
This is not for Roth IRAs (Roth IRAs don’t have RMDs during your life).
Some plans don’t offer QLACs, so availability matters.
Why this exists (and who it helps)
This tool was built to help people manage longevity risk—the risk of living a very long life and outliving savings.
A QLAC lets you build a “retirement paycheck” that turns on later, often around age 80–85.
Think of it like setting a future floor under your spending so you can worry less about your 80s and 90s.
This can be helpful if:
Your pre-tax accounts are large, and RMDs at age 73+ will push up taxes you don’t need.
You like the idea of a guaranteed, simple paycheck later in life.
You want to coordinate lifetime income with Social Security, pensions, and your retirement income guardrails.
It’s often not a fit if you need easy access to the money, expect high market returns on these dollars, have serious health concerns that shorten life expectancy, or already have plenty of lifetime income.
How it defers RMDs
RMDs start for most people at age 73 today (rising to 75 in 2033).
RMDs are based on your retirement account balance each year.
Dollars moved into a QLAC are left out of that balance until your QLAC payments begin.
Less balance counted = lower RMDs = less taxable income in those years.
When the QLAC income starts, those payments are taxed as ordinary income (like other IRA withdrawals), and the RMD exclusion ends—because you’re now receiving the income.
A quick example with round numbers
Say you’re 68 with a $3,000,000 traditional IRA.
You move $200,000 into a QLAC that will start paying you income at age 80.
From now until age 79, that $200,000 is not included in your RMD calculation.
Your RMDs in your 70s are smaller than they would’ve been.
At 80, the QLAC turns on and pays a monthly check for life (the amount depends on rates, your start age, and options you pick).
You’ve traded some liquidity and market upside on those dollars for a later-life floor and potential near-term tax relief.
Choices you’ll make
Income start age: Later start = bigger check, but you wait longer. You must start no later than age 85.
Payout type: Single life (just you) or joint-and-survivor (covers you and a spouse).
Death benefits: You can add a “return of premium” feature so money not paid out can go to heirs.
Amount: Up to $210,000 lifetime per person. If you already bought a smaller QLAC, you can often “top up” to the cap.
Insurer quality: I care a lot about the issuer’s financial strength. You should too.
Contract details: QLACs are meant to be held. Liquidity is very limited after a short “free-look” window.
Why you might consider a QLAC
Many of the women I serve are in their late 50s or 60s with $2–$10 million saved, much of it pre-tax.
They don’t need every dollar their RMDs will force out in their 70s.
A QLAC can:
Reduce taxable income in early retirement, which can help with Medicare surcharges (IRMAA), capital-gains planning, and Roth conversion windows.
Add a clear, guaranteed paycheck in later life so spending feels calm.
Simplify the plan: fewer moving parts and fewer what-ifs for your 80s and 90s.
It won’t be right for everyone, and it’s not an either/or with markets.
It’s a tool we can carve out for a specific job inside your broader retirement paycheck and guardrails.
What to do next
Model before/after RMDs. Let’s compare your RMDs with and without a QLAC and see the tax ripple effects.
Pick a target amount. Decide how much (if any) to carve out—up to $210,000. We’ll keep liquidity needs in mind.
Choose start age and options. Single vs joint, and whether a refund feature makes sense for your family.
Check availability. Some employer plans allow QLACs; IRAs depend on the custodian and insurer lineup.
Vet the insurer. Review financial strength ratings and the state’s guaranty association limits.
Fit it into your guardrails. Make sure this supports your retirement paycheck, tax plan, and beneficiary wishes.
Common questions I hear
Can I use Roth money? No—QLACs aren’t for Roth IRAs.
Can I change my mind later? There’s usually a short “free-look” window, but after that, QLACs are designed to be held.
What if I divorce after buying a joint contract? The rules often allow joint-and-survivor benefits if set up correctly.
What about Social Security? A QLAC can pair well with delayed Social Security, but we’ll explore the timing together.
Bottom line: a QLAC can be a tax-efficient way to push some RMDs into later years and buy yourself a future paycheck.
If you’d like to see how this could fit your plan, book a clarity conversation and we can model it with your numbers.
Note: a QLAC might also be a way to plan for long-term care needs and serve as a supplement or alternative to traditional long-term care insurance.
I should also note that I’m not near as big a fan of annuities as some folks in the financial advice industry.
In fact, I’ve written about annuities and my opinion of them before.
Having said that, the right annuity can make perfect sense for the right person in the right situation.
Here’s a chart of some common types of annuities:
And please be wary of “advisors” who seem to believe an annuity is always the answer to your financial and retirement planning needs.
I appreciate your continued readership.
Please let me know if you have any feedback or suggestions for future essays.
Until next Wednesday,
Russ