Most retirement planning conversations focus on the first few years of retirement.
When should you claim Social Security?
How much can you safely withdraw?
Should you convert part of your IRA to a Roth IRA?
How should your investments be positioned?
Those are all important questions.
But there is another question that often gets less attention:
What happens if you live a very long time?
Not just into your late 70s or early 80s, but into your late 80s, 90s, or beyond.
That is where a QLAC may be worth understanding.
A QLAC, short for Qualified Longevity Annuity Contract, is a special type of deferred income annuity that can be purchased inside certain retirement accounts, such as a traditional IRA or qualified retirement plan. Its purpose is fairly simple: you use part of your retirement account today to create guaranteed income later in life.
In plain English, a QLAC can function like a personal pension that begins at an older age.
Why Life Expectancy Is Often Underestimated
One reason QLACs are worth discussing is that many people underestimate how long retirement may last.
When people hear the phrase “life expectancy,” they often think of it as a finish line. It is not. Life expectancy is an average. That means many people will live longer than the average, and some will live much longer.
This is especially important for married couples.
The planning question is not simply, “How long will I live?”
The better question is:
How long might either one of us live?
Using the current Social Security period life table, a 72-year-old male has an average remaining life expectancy of a little more than 13 years, and a 72-year-old female has an average remaining life expectancy of a little more than 15 years. That means, on average, those individuals would live into their mid-to-late 80s. But for a married couple, the more important planning issue is the second death — how long at least one spouse may still be living. Even using general population mortality, a same-age 72-year-old couple has a meaningful likelihood that one spouse may live into their 90s. The Social Security Administration’s life table also makes clear that period life expectancy is an average based on mortality experience during a specific period, not a personal prediction.
For a healthy couple, the planning horizon may be even longer.
There is also another factor worth considering. Today’s mortality tables are based on current experience and assumptions. They do not fully tell us what medical advances, earlier disease detection, better treatments, or artificial intelligence-driven healthcare may do over the next 20 or 30 years.
That does not mean we should assume everyone will live to 100.
But it does mean that building a retirement plan around average life expectancy alone can be risky.
Longer life is good news personally. Financially, it can create pressure on a retirement income plan.
A plan that looks comfortable through age 85 may look very different if one spouse lives to age 95 or 100.
That is the risk a QLAC is designed to help address.
What Is a QLAC?
A QLAC is a Qualified Longevity Annuity Contract. It is a deferred income annuity purchased with money from a qualifying retirement account.
In return, the insurance company promises to provide income at a future date.
The income does not usually begin immediately. It is intentionally delayed, often until much later in retirement. Under IRS rules, QLAC payments generally must begin no later than the first day of the month after the owner turns age 85.
That delay is what makes the strategy different.
A QLAC is not designed to solve the first five years of retirement. It is designed to help provide income if retirement lasts much longer than expected.
In that sense, a QLAC is not primarily an investment strategy.
It is a longevity strategy.
Why the Year Before RMDs Begin May Be the Best Time to Consider One
In my opinion, one of the best times to consider a QLAC is the year before required minimum distributions begin.
That does not mean everyone should buy one at that point. It means that the year before RMDs begin is a natural time to review whether a QLAC fits into the retirement income plan.
By that stage, many of the major retirement decisions are coming into focus.
Social Security may already have started, or the claiming strategy may be clear. Pension income, if any, is usually known. Spending patterns are easier to estimate. The investment portfolio has been tested through the early retirement years. And upcoming RMDs can be projected with more accuracy.
That is also when the client can ask an important question:
Do I need all of my IRA money for income now, or would part of it be more valuable as guaranteed income later in life?
If the IRA is needed for current living expenses, a QLAC may not be appropriate.
But if the client has sufficient liquidity, other income sources, and a concern about living into their late 80s or 90s, the year before RMDs begin can be an excellent time to evaluate the strategy.
There is another reason this timing matters.
Once RMDs begin, the IRS requires annual withdrawals from traditional IRAs and many retirement plans. A QLAC can remove the amount used to purchase the contract from the account balance used to calculate RMDs before QLAC income begins. That may reduce taxable distributions during the early RMD years.
But the goal should not be simply to reduce RMDs.
The goal should be to build a stronger retirement income plan.
The RMD Benefit
Required minimum distributions can create tax pressure for retirees who have significant balances in traditional IRAs or employer retirement plans.
RMDs may affect more than just income taxes. They can also influence Social Security taxation, Medicare IRMAA brackets, and the ability to do future Roth conversions.
A QLAC may help because the amount used to purchase the contract is generally excluded from the retirement account balance used to calculate RMDs before payments begin.
That can lower required distributions during the early RMD years.
However, this benefit should not be overstated.
A QLAC generally defers taxable income. It does not make the income tax-free. When payments begin from a pre-tax retirement account, those payments are generally taxed as ordinary income.
So the tax benefit is real, but it is not magic.
The more important benefit is that the retiree has created a future income stream for the years when longevity risk becomes more significant.
Current QLAC Limits
The rules around QLACs became more favorable after SECURE 2.0.
The old rule that limited QLAC purchases to 25% of the retirement account balance has been repealed for contracts purchased or received after December 28, 2022.
The remaining limit is a dollar limit, which is adjusted for inflation.
For 2026, the QLAC premium limit is $210,000.
That is the maximum amount eligible under the QLAC rules. It is not a recommendation.
For many retirees, if a QLAC is used at all, the appropriate amount may be much smaller.
Can a QLAC Be Joint?
Yes. A QLAC can often be structured as a joint-life contract for a married couple.
That is an important point because the retirement planning issue is often not just how long one person may live. It is how long either spouse may live.
A joint-life QLAC can be designed so that income continues for the surviving spouse. That may better match the real risk for many couples: one spouse living into their 90s or beyond.
However, there is a tradeoff.
A joint-life payout will generally be lower than a single-life payout because the insurance company may have to pay income for a longer period. The survivor percentage also matters. A contract that continues 100% of the income to the surviving spouse will generally pay less than one with a reduced survivor benefit.
That does not make one choice better than the other.
It simply means the contract has to be designed around the planning goal.
For some couples, the priority is maximizing income.
For others, the priority is protecting the surviving spouse.
Can a QLAC Help You Enjoy More of Your Money Earlier?
One overlooked benefit of a QLAC is not just what it may provide later in retirement, but how it may affect decisions earlier in retirement.
Many retirees are careful spenders. In some cases, too careful.
They have spent a lifetime saving money, and when retirement finally arrives, it can be difficult to shift from accumulation to spending. Even when the plan looks strong, there may be a lingering concern:
What if I live too long?
That concern can cause retirees to underspend during the healthier, more active years of retirement.
A QLAC may help address that fear.
If a retiree knows that a new guaranteed income stream is scheduled to begin at age 80 or 85, they may feel more comfortable using some of their other assets during their 60s and 70s. In other words, the QLAC can act as a future income backstop.
It does not mean spending recklessly.
It does not mean ignoring taxes, inflation, healthcare costs, or investment risk.
But it may allow the retiree to enjoy retirement with more confidence, knowing that part of their later-life income has already been set aside.
This is one reason I view a QLAC as more than an annuity product.
Used properly, it can be a retirement behavior tool.
It can help answer the question many retirees quietly struggle with:
How much can I safely enjoy today without putting my future self at risk?
A Simple Example
Consider a healthy 72-year-old married couple with a $1.2 million traditional IRA.
They are approaching the age when required minimum distributions will begin. They have Social Security income, some non-IRA savings, and enough liquidity to cover their near-term needs. Their concern is not the first few years of retirement. Their bigger concern is what happens if one spouse lives well into their 90s.
As part of their retirement income review, they consider using $100,000 of the IRA to purchase a joint-life QLAC, with income scheduled to begin at age 85.
This does several things.
First, the $100,000 used to purchase the QLAC is generally removed from the IRA balance used to calculate RMDs before QLAC income begins. That may modestly reduce required distributions during the early RMD years.
Second, it creates a future income source that is designed to begin later in retirement, when longevity risk becomes more important.
Third, and perhaps just as important, it may give the couple more confidence to enjoy some of their remaining assets during their 70s and early 80s.
Without the QLAC, they may look at their IRA and worry, “What if one of us lives to 95 or 100?”
With the QLAC, they know that a portion of their retirement assets has already been set aside to create guaranteed income later in life. That does not mean they should spend recklessly. But it may allow them to spend more comfortably during the healthier, more active years of retirement.
In this example, the couple is not putting all of their IRA into an annuity. They are using a portion of the account to protect against a specific risk: living longer than expected.
That is the proper way to think about a QLAC.
It is not an all-or-nothing decision.
It is a way to carve out part of the retirement plan for income later in life.
Why Someone Might Consider a QLAC
A QLAC may be worth considering for someone who:
- Has sufficient retirement assets and does not need all IRA assets for near-term living expenses
- Is concerned about living into their late 80s, 90s, or beyond
- Wants a future source of guaranteed lifetime income
- Does not have a traditional pension, or wants to supplement one
- Would like to reduce RMDs during the early RMD years
- Wants to create a more secure income floor later in retirement
- Wants more confidence to enjoy some of their money earlier in retirement
- Is comfortable giving up liquidity on a portion of retirement assets
The key phrase is a portion of retirement assets.
A QLAC should generally not consume money that may be needed for emergency expenses, healthcare costs, family needs, or flexible spending in the early years of retirement.
Why Someone Might Not Want a QLAC
A QLAC is not appropriate for everyone.
It may be less attractive for someone who:
- Needs access to their retirement assets
- Has significant health concerns or shorter life expectancy
- Places a high priority on leaving assets to heirs
- Already has enough guaranteed income from Social Security, pensions, or other annuities
- Is uncomfortable transferring longevity risk to an insurance company
- Does not fully understand the tradeoff between future income and current liquidity
This last point is important.
With any annuity strategy, the tradeoff has to be clear.
You are generally giving up some flexibility in exchange for a contractual income promise.
That can be valuable, but it should be done deliberately.
What About Beneficiaries?
One concern people often have with income annuities is, “What happens if I die early?”
QLAC contracts may offer certain death benefit features, including return-of-premium options, but those features must fit within IRS rules.
Adding stronger beneficiary protection may reduce the amount of lifetime income the contract provides.
That does not make the feature good or bad.
It simply means the design has to match the retiree’s goals.
For some people, maximizing lifetime income is the priority.
For others, protecting a spouse or heirs is more important.
The contract structure matters.
QLACs and the Retirement Paycheck Strategy
One way to think about a QLAC is as part of a broader retirement paycheck strategy.
Early retirement may be funded by cash reserves, investment withdrawals, Social Security, pensions, or part-time income. Later retirement may rely more heavily on guaranteed income sources.
A QLAC can help create a future income floor.
For example, a retiree may decide:
- Social Security will cover part of essential expenses.
- Investments will provide flexibility and growth potential.
- Cash reserves will help manage short-term needs.
- A QLAC will provide additional guaranteed income later in life.
This can make the retirement plan more resilient, especially if someone lives much longer than expected or if markets are difficult during retirement.
It may also help clients use their retirement assets more intentionally.
Without a later-life income backstop, some retirees hold back too much during their healthiest years because they are worried about the unknown. With a QLAC, a portion of the future income plan is already in place, which may make the earlier years of retirement easier to enjoy.
The Biggest Mistake With QLACs
The biggest mistake is viewing a QLAC as a magic solution.
It is not.
A QLAC does not eliminate the need for investment planning, tax planning, cash reserves, healthcare planning, Roth conversion analysis, charitable planning, or estate planning.
It also does not avoid taxes forever.
What it can do is help solve one specific problem: the risk of outliving income late in retirement.
Used properly, that can be valuable.
Used improperly, it can create unnecessary complexity and reduce flexibility.
The Planning Point
QLACs are not for everyone, and they should not be sold as a one-size-fits-all retirement income solution.
But for the right retiree, they can play a useful role.
The best time to evaluate one may be the year before RMDs begin, when the major pieces of the retirement income plan are easier to see.
At that point, the question is not simply: Should I buy a QLAC? But: Would guaranteed income later in life make my retirement plan stronger, more flexible, and easier to live with?
For some retirees, the answer will be no.
For others, especially healthy couples with meaningful IRA assets and a realistic chance that one spouse may live well into their 90s, a QLAC may be worth discussing.
It may protect against the financial risk of living longer than expected.
And just as importantly, it may give retirees more confidence to enjoy the earlier years of retirement while they are healthy enough to do so.
Frequently Asked Questions About QLACs
What is the main purpose of a QLAC?
The main purpose of a QLAC is to help protect against longevity risk — the risk of living longer than expected and needing income later in retirement.
A QLAC is not designed to solve every retirement income issue. It is designed to create a future income stream that begins later in life, often at age 80 or 85.
When is the best time to consider a QLAC?
In my opinion, one of the best times to consider a QLAC is the year before required minimum distributions begin.
That is when your Social Security strategy, pension income, spending needs, tax picture, and projected RMDs can all be reviewed together. It is also a good time to ask whether part of your IRA might be more useful as guaranteed income later in life.
Can a QLAC reduce my RMDs?
It may reduce RMDs before the QLAC income begins.
The value of the QLAC is generally excluded from the retirement account balance used to calculate required minimum distributions before payments begin.
However, this is usually a tax deferral benefit, not a tax elimination benefit. Once QLAC payments begin from a pre-tax retirement account, they are generally taxable as ordinary income.
Can a QLAC be joint for a married couple?
Yes. A QLAC can often be structured as a joint-life contract so that income continues for the surviving spouse.
This may be especially important for married couples because the planning issue is often not just how long one spouse may live, but how long either spouse may live.
Can a QLAC help me spend more confidently earlier in retirement?
Possibly.
One overlooked benefit of a QLAC is behavioral. If you know that a guaranteed income stream is scheduled to begin at age 80 or 85, you may feel more comfortable using some of your other assets during your healthier, more active retirement years.
That does not mean spending recklessly. It means a QLAC may provide a later-life income backstop, which can make earlier retirement spending decisions feel less uncertain.
Does everyone need a QLAC?
No.
A QLAC is not appropriate for everyone. It may make sense for someone with sufficient retirement assets, adequate liquidity, concern about living into their late 80s or 90s, and a desire for more guaranteed income later in life.
It may not make sense for someone who needs access to all of their retirement money, has significant health concerns, already has strong pension income, or places a high priority on leaving assets to heirs.
What is the biggest downside of a QLAC?
The biggest downside is reduced liquidity.
Once money is used to purchase a QLAC, you generally lose access to that money in exchange for the future income promise. That is why a QLAC should usually be funded with only a portion of retirement assets, not money that may be needed for emergencies, healthcare, or flexible spending.
What is the biggest mistake people make with QLACs?
The biggest mistake is looking at a QLAC only as a way to reduce RMDs.
The RMD treatment can be helpful, but the real planning question is whether guaranteed income later in life makes the retirement plan stronger, more secure, and easier to live with.
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