QLAC: Longevity Insurance for Retirees

Discover the QLAC: A Simple, Effective Annuity for Retirees

The QLAC, or Qualified Longevity Annuity Contract, is a type of annuity that offers retirees a simple and effective solution for late-life security. By funding a QLAC with up to $210,000 from a traditional IRA, 401(k), or similar pre-tax account, retirees can receive fixed monthly payments starting at a date of their choice, up to age 85, for life.

The QLAC stands out by excluding the money from required minimum distribution calculations, which start at age 73. This can lower taxable income, potentially avoiding higher Medicare premiums and taxes on Social Security benefits. Recent changes from the Secure Act have made QLACs more accessible for everyday savers.

Retirees often overlook QLACs due to flashy, complex annuity options pushed by advisors. However, QLACs offer tax savings and late-life security. Studies show that most people underestimate how long theyll live, leaving them vulnerable when savings dwindle.

For example, a 65-year-old with a $1 million IRA putting $200,000 into a QLAC starting at age 80 could receive about $44,000 yearly for life, totaling over $660,000 if living to 95. However, QLACs are not for everyone. Those who need liquidity, have Roth accounts, or have a short life expectancy should skip QLACs.

Before required minimum distributions hit, review your balances, run projections, and shop insurers with a fee-only advisor. A QLAC can serve as a safety net for your 80s and beyond, bridging gaps when other income thins out.

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