What Is a QLAC? A Plain-English Guide to Qualified Longevity Annuity Contracts
A QLAC is a deferred annuity inside your IRA that can shrink RMDs and pay guaranteed income as late as 85. See how it works, the 2026 limit, and the trade-offs.
What Is a QLAC? A Plain-English Guide to Qualified Longevity Annuity Contracts
A QLAC, or Qualified Longevity Annuity Contract, is a type of deferred income annuity that can be purchased with money already inside certain retirement accounts, such as a traditional IRA or 401(k). If the contract meets IRS requirements, its value is excluded from the account balance used to calculate required minimum distributions (RMDs) until payments begin. Income can be delayed until as late as the first day of the month after you turn 85.
That makes a QLAC less about chasing investment returns and more about solving a specific retirement problem: How do you create income if you live much longer than expected?
For someone with substantial pretax retirement savings, a QLAC can shift some taxable income from your seventies into your eighties and beyond while creating guaranteed lifetime income. But it comes with meaningful trade-offs. The money is difficult to access; there is no market upside on the amount committed; inflation can reduce the purchasing power of future payments, and the death-benefit choices can affect how much income you receive.
The Problem a QLAC Solves
Once you reach your applicable RMD age, the IRS generally requires you to withdraw a minimum amount each year from traditional retirement accounts. For many today, that starting age is 73. Under current law, it rises to 75 for people who turn 74 after 2032 (those born in 1960 or later). The first RMD can generally be delayed until April 1 of the following year, although doing so can mean taking two taxable distributions in the same calendar year.
The calculation is based largely on your previous year-end account balance and an IRS life expectancy factor. So even if you do not need the money, the rules can require you to take it. That can create a tax-planning problem. A larger RMD may increase taxable income and can affect other parts of your retirement tax picture, including the taxation of Social Security benefits and income-related Medicare premiums.
But there is another problem hiding under the tax issue: longevity risk. Running out of money at 75 is not the only retirement risk. What happens if you live to 92, 95, or 100? Your portfolio may need to support you for decades after you originally expected to stop working. A QLAC is designed around that possibility. Instead of keeping every retirement dollar available today, you use a portion to purchase income that starts later and continues for life.
What Is a QLAC, Exactly?
A QLAC is a deferred income annuity that meets IRS conditions, which lets its value sit outside your RMD math until payments start. The regulations say that “qualifying,” and the industry says “qualified.” Both mean the same product.
An ordinary deferred annuity doesn’t get this treatment automatically. To qualify, a contract must:
- Be a fixed annuity, since variable and indexed contracts don’t count.
- Pay level payments, or payments that increase only as the RMD regulations allow, such as a fixed annual percentage.
- Start income no later than on the first day of the month after your 85th birthday, stay under the premium limit, and state that it’s meant to be a QLAC.
The insurer, not you, reports QLAC status to the IRS each year on Form 1098-Q. Your job is to confirm the contract is issued as a QLAC before you sign. Eligible accounts include traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, 403(b)s, and governmental 457(b)s. Roth IRAs are out because they have no lifetime RMDs to defer.
How Does a QLAC Work?
It’s easiest to follow step by step.
- First, you transfer money from an eligible retirement account into the QLAC. Because the money remains within the retirement account structure, buying the contract is not generally treated as taking a taxable distribution.
- Next, you choose when you want the income to begin. That can be years in the future, subject to the age 85 limit.
- During the deferral period, the QLAC’s value is excluded from the RMD calculation. That means the remaining retirement account has a smaller balance for RMD purposes.
- Finally, when the selected income date arrives, the insurer begins making payments according to the contract. Those payments are generally taxable as ordinary income when received.
A single premium immediate annuity, or SPIA, is purchased today with income starting within a year, and it carries no RMD benefit at all. A deferred income annuity, or DIA, is also purchased today, but the income doesn’t begin until years later; it can be funded with any money, not just retirement funds, and it has no premium cap and no RMD exclusion.
RMD illustration
How a $200,000 QLAC changes a first-year RMD
An $800,000 traditional IRA at age 73, using the IRS Uniform Lifetime Table divisor of 26.5.
Without a QLAC
First-year RMD
$30,189
With $200,000 in a QLAC
First-year RMD
$22,642
First-year RMD reduced by
about $7,547Illustrative only; assumes the balance hasn't changed and the standard table applies. The tax is deferred, not eliminated: QLAC payments are taxed as ordinary income when received.
The exact result depends on the account balance, the applicable IRS table, and the individual’s circumstances. And remember: the tax has not disappeared. The QLAC payments will eventually be taxable when they are received.
What SECURE 2.0 Changed About QLACs
QLAC rules changed significantly under the SECURE 2.0 Act.
One of the most important changes was eliminating the old requirement that QLAC premiums generally be limited by both a dollar amount and 25% of the individual’s retirement account balance. The percentage limitation was repealed for newer QLAC purchases. IRS guidance confirms that premiums are no longer limited to 25% of the account balance.
The dollar limit is now the key figure to watch. For 2026, the QLAC premium limit is $210,000 per person across qualifying retirement accounts. The IRS confirmed that amount in Notice 2025-67. Because the limit can change with inflation, check the current IRS figure before purchasing. The inflation adjustments cut both ways for existing owners: if you funded a QLAC in an earlier year when the cap was lower, you can generally top it off up to the current limit, rather than being stuck with whatever ceiling applied at the time of purchase.
SECURE 2.0 also addressed another practical issue: a QLAC can include a rescission or “free-look” period of up to 90 days without losing its QLAC status. The actual period can depend on the contract and applicable state law.
The law also clarified how QLACs hold up under a change in marital status. A QLAC with joint-and-survivor benefits doesn’t lose its status if the couple divorces before payments start, provided a qualifying QDRO or separation instrument is in place, so a divorce alone doesn’t force the contract to be unwound or restructured.
QLAC Rules at a Glance
A QLAC comes with specific rules governing how much you can put into the contract, which retirement accounts can fund it, when income can begin, and how the contract is treated for RMD purposes. Here’s a quick overview of the rules and limits to keep in mind:
Rules | Current treatment |
2026 premium limit | $210,000 per person |
Limit | Aggregate across qualifying accounts |
Eligible accounts | Traditional IRA, SEP, SIMPLE, 401(k), 403(b), governmental 457(b) |
Roth IRA | Not eligible |
Latest income start | First day of the month after age 85 |
Contract type | Fixed deferred income annuity |
RMD treatment | QLAC value excluded before annuitization |
Tax at purchase | Generally no current taxable distribution |
Tax on payments | Generally ordinary income |
Free-look period | Up to 90 days, subject to applicable rules |
Reporting | Insurer files Form 1098-Q |
Rules and limits can change, so verify the current year requirements with the IRS before acting.
The Tax Benefit, and What It Doesn’t Do
So how does a QLAC work on the tax side? It defers taxes. It doesn’t erase them. Every dollar eventually comes out as ordinary income. What you gain is timing: income moves out of the years when you’re juggling brackets, IRMAA tiers, and Social Security taxability, which can make tax season with annuities a little less painful.
The deferral can also backfire. If you’re in a low bracket in your seventies, a large fixed payment in your eighties, stacked on Social Security and later RMDs, may be taxed at higher rates. That’s especially true for a widowed spouse filing as single. For many people, partial Roth conversions between retirement and RMD age do more and keep the money accessible. Medicaid adds another wrinkle. It treats an annuitized contract differently than an IRA balance, and the rules vary by state, so anyone applying for Medicaid with retirement accounts should check how a QLAC would be counted.
The Trade-offs You Should Understand Before Buying
Many pages that explain what a QLAC is come from companies that earn a commission when you buy one. Here’s the other side of the story:
- Illiquid. Once the free-look window closes, the premium is gone. A QLAC annuity can’t fund a roof or a medical bill.
- No market upside, and inflation bites. You’re buying certainty, and it has a price. At 3% inflation, today’s dollar buys about two-thirds as much in 15 years, a slow squeeze that inflation in retirement makes hard to ignore. A fixed annual increase helps, but it lowers your starting payment.
- Early death. A bare-bones contract can leave heirs nothing. Return of premium, cash refunds, or joint and survivor options fix that but reduce your monthly check. Verify what’s included rather than assuming.
Also check the insurer’s financial strength ratings. State guaranty coverage is capped and varies, so treat it as a backstop. And remember the premium limit means a QLAC solves only part of the RMD problem for large balances.
Who a QLAC Actually Suits
A QLAC is most relevant to a fairly specific type of retiree.
You may want to investigate one if you have substantial pretax retirement savings, do not need every dollar of your RMDs to meet current expenses, have enough liquid assets for emergencies, and want to protect against the probability of living well into your nineties.
It can also make sense to explore a joint and survivor arrangement when a married couple wants to protect income for the surviving spouse. On the other hand, a QLAC deserves more scrutiny if you need the money for current expenses, have limited retirement savings, prioritize leaving the largest possible estate, or have most of your retirement in Roth accounts.
The simplest question then may be: if you knew you would live to 95, would your current retirement-income plan still work? If the answer is yes, you may not need longevity insurance. If the answer is no, a QLAC is one tool worth understanding, as it helps you know how much you need to retire before deciding how big a slice of your savings to commit.
How to Buy a QLAC
Before purchasing one, start with the rules rather than the sales pitch.
- Verify the current premium limit. The 2026 limit is $210,000, but confirm the current figure before purchasing.
- Choose your income start age. A later start generally provides more time for the deferred-income structure to work, but it also means more time before you receive anything.
- Compare the same features across insurers. Look at survivor benefits, death benefits, inflation provisions, and the starting income rather than comparing headline quotes alone.
- Check the insurer’s financial strength. A QLAC’s guarantee is only as good as the company behind it, and your payments may not begin for a decade or more. Review independent ratings from agencies such as AM Best or S&P and look up your state’s guaranty association limits.
- Confirm in writing that the contract qualifies as a QLAC. An ordinary deferred income annuity held inside a traditional IRA does not receive the RMD exclusion. The contract should state that it is intended to be a QLAC, and the insurer should confirm it will report it to the IRS on Form 1098-Q each year.
- Read the contract during the free-look period. Do not treat the rescission window as a formality.
It can also be useful to have a qualified tax or financial professional review the purchase alongside your broader retirement income plan. A QLAC decision affects taxes, liquidity, estate planning, and future income, so it should not be made in isolation.
Alternatives Worth Comparing First
A QLAC is not the only way to address RMDs or longevity risk. Partial Roth conversions can reduce future RMD exposure while keeping the assets accessible. Qualified charitable distributions from age 70½ count toward your RMD without adding to taxable income once RMDs start.
Delaying Social Security can increase future inflation-adjusted benefits. A deferred income annuity can provide future income without the QLAC premium restrictions. In contrast, a bond or Treasury Inflation-Protected Securities ladder can provide a different approach to predictable cash flow. Several of these strategies can also be combined. Retirement planning is rarely an either-or decision.
Build Income That Outlasts You
The real value of a QLAC is not a clever tax loophole. It is the ability to turn part of a retirement portfolio into income designed to continue for life. That can be valuable for the right person. But the tradeoff is permanent: you exchange liquidity and potential investment growth for a future income guarantee.
Before buying, look at the entire plan — taxes, Social Security, Medicare costs, investments, emergency savings, estate goals, and the possibility that you may live longer than expected. My Guide To Retirement offers plain-English guides covering retirement income, taxes, annuities, Medicare, and other planning topics. Explore the site’s retirement planning resources to see how a QLAC fits alongside the rest of your plan.
FAQs About QLACs
A QLAC, or Qualified Longevity Annuity Contract, is a fixed deferred income annuity purchased with money inside an eligible retirement account. If it meets IRS requirements, its value is excluded from the balance used to calculate RMDs before payments begin. Income can start as late as the month after age 85.
You transfer money from an eligible retirement account into the contract, select a future income date, and receive guaranteed payments beginning on that date. During that deferral period, the QLAC value is excluded from the RMD calculation. Payments are generally taxable as ordinary income when received.
The 2026 QLAC premium limit is $210,000 per person. The limit applies across qualifying retirement accounts rather than giving you a separate $210,000 allowance for every account.
No. Roth IRAs are not eligible for QLAC treatment. Because Roth IRAs are not subject to lifetime RMDs for the original owner, there is no RMD balance to exclude.
It depends on the contract. A QLAC can include a return of premium or other death benefit provision, while some contracts may provide less protection. Adding beneficiary protection generally reduces the income available to you, so this is an important trade-off to compare before purchasing.
Generally, you should not buy a QLAC expecting to access the premium later. The contract is designed for long-term income, not liquidity. A qualifying free-look period of up to 90 days may be available, depending on the contract and applicable law.
It can be useful for someone with substantial pretax retirement savings, enough liquid assets elsewhere, and a strong desire to protect against the financial risk of living a very long life. But it is not automatically appropriate. The loss of liquidity, lack of market upside, and inflation risk all need to be considered.
As a simple illustration, at age 73 the IRS Uniform Lifetime Table uses a 26.5 divisor. A $100,000 QLAC exclusion would therefore reduce the first year’s RMD calculation by about $3,774, assuming the standard table applies. The exact RMD depends on the account balance and the applicable IRS rules.
A QLAC is a specific type of deferred income annuity that meets IRS requirements for RMD treatment. It has restrictions on the contract, funding amount, and income start date in exchange for excluding its value from the RMD calculation. A regular deferred annuity does not automatically receive that treatment.
There is no single correct age. The decision depends on how much income you need now, how much qualified savings you have, when you expect to need guaranteed income, and how much liquidity you want to retain. Buying before RMDs begin can provide more years of RMD exclusion, but it also means committing money earlier.
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