Reviewed September 2026.
A QLAC (qualified longevity annuity contract) is a deferred income annuity you buy inside an IRA or workplace plan with dollars that already sit in that account. Premiums are limited by an IRS dollar cap (SECURE 2.0 replaced the old “25% of account” QLAC limit with a higher statutory ceiling that the IRS indexes; confirm the current dollar maximum before you buy). Income typically starts at a chosen age up to 85. The main planning hook: amounts used to buy a QLAC can be excluded from RMD calculations until payments begin, subject to QLAC rules.
RMD orientation: Required minimum distributions. Longevity paycheck thinking outside QLACs: Pension lump sum vs annuity, Social Security claim age.
What a QLAC is (and is not)
| Item | QLAC pattern | Not a QLAC |
|---|---|---|
| Where it lives | IRA / eligible employer plan | Taxable brokerage annuity alone |
| Purpose | Deferred lifetime income starting later | Day-one paycheck like an immediate annuity |
| RMD angle | Premium (within limits) can sit outside the RMD formula until payouts start | Ordinary deferred annuity without QLAC certification |
| Liquidity | Usually little or none before the income start date | Brokerage cash you can sell anytime |
| Tax on payouts | Generally ordinary income from pre-tax IRAs/plans | Nonqualified exclusion-ratio math: Exclusion ratio |
Insurers and custodians must issue the contract as a QLAC under IRS rules. A random “longevity annuity” label on a taxable account is not the same product for RMD relief.
Worked sketch: $150,000 premium at 65, income at 80
Morgan is 65 with a $900,000 traditional IRA. Morgan moves $150,000 into a QLAC that starts lifetime payments at 80 (illustrative quote only).
| Effect | Plain reading |
|---|---|
| RMD base | The $150,000 QLAC premium is generally excluded from the IRA’s RMD calculation while deferred (confirm current IRS QLAC regs and Form 1098-Q reporting) |
| Remaining IRA | RMDs apply to the other ~$750,000 under normal tables |
| At 80 | QLAC payments begin; those dollars become taxable income as received |
| Tradeoff | Morgan cannot freely spend the $150,000 for a home repair at 72 |
Cash buckets still matter for years before income starts: Gliding into retirement cash, Bucket strategy.
When people shop a QLAC (literacy cues)
- They fear living past 90 and want a late-life paycheck layered on Social Security.
- They want to shrink near-term RMDs on a slice of a large IRA without a Roth conversion tax bill.
- They already have emergency cash and are comfortable locking premiums.
- They skip QLACs when they need liquidity, dislike insurer credit risk, or the quote’s payout rate looks poor versus waiting and investing.
Return-of-premium and spousal continuation options change the monthly amount. Read the illustration’s guaranteed vs non-guaranteed columns the same way you would a pension election.
Checklist
- Confirm the contract is issued as a QLAC and fits the current IRS premium cap.
- Pick an income start age (often 75–85) and single vs joint life.
- Ask how the custodian will report the QLAC for RMD purposes each year.
- Keep non-QLAC cash for surprises before the income date.
- Compare against delaying Social Security and against keeping the dollars invested without an annuity.
Educational only. Not tax, insurance, or investment advice. QLAC caps, start ages, and RMD exclusion rules are statutory and regulatory; confirm with current IRS guidance, the insurer illustration, and a qualified professional.