Qualified Longevity Annuity Contract (QLAC)
A deferred income annuity purchased inside a retirement account that begins paying income at an advanced age (up to 85), with funds used to purchase the QLAC excluded from RMD calculations.
Understanding Qualified Longevity Annuity Contract (QLAC)
QLACs allow retirees to defer income from a portion of their retirement account to protect against outliving their money. The SECURE 2.0 Act increased the QLAC limit to $200,000. While QLACs reduce RMDs on the allocated portion, IUL provides a different approach - there are no RMDs at all, and policy loans provide tax-free income at any age without the longevity annuity structure.
Why This Matters for Retirement: Understanding Qualified Longevity Annuity Contract (QLAC) is essential for making informed decisions about tax-free retirement income strategies. Whether you are evaluating an IUL policy, planning Roth conversions, or comparing retirement vehicles, this concept directly affects your outcomes.