Qualified Longevity Annuity Contract (QLAC)

A QLAC is a deferred Annuity with special treatment under the required-distribution rules. You move part of a traditional IRA, or of a 401(k), 403(b) or governmental 457(b) plan that offers one, into a contract with an insurer that promises lifetime income from a start date you choose, no later than the first day of the month after your 85th birthday. Bought with after-tax money, the same kind of contract is just a deferred income annuity, or longevity annuity; the QLAC label and its RMD treatment exist only inside an IRA or plan.

Until payments begin, the QLAC’s value is left out of the balance used to calculate your required minimum distributions. That lowers each year’s RMD, and the taxable income that comes with it, from your RMD age until the QLAC starts paying. RMDs begin at 73 for most people born 1951–1959 and at 75 for those born in 1960 or later.

The second job is insurance. Because payments start late, a smaller premium buys a larger income for your 80s and 90s, the years when longevity risk bites hardest.

The rules sit in Treasury regulation §1.401(a)(9)-6(q), as rewritten after the SECURE 2.0 Act. For contracts bought on or after December 29, 2022, the old cap of 25% of your account balance is gone, and the dollar limit rose to $200,000, indexed to inflation in $10,000 steps. The limit is $210,000 for 2026, unchanged from 2025.

The limit counts every QLAC premium you have paid from any IRA or workplace plan, so contracts bought from different accounts or insurers share one limit. If you overpay by mistake, returning the excess to the non-QLAC part of the account by the end of the following year keeps the contract qualified.

A QLAC must be a fixed contract, not a variable or indexed annuity, though cost-of-living increases and insurer dividends are allowed. After your required beginning date it cannot offer a cash surrender value, apart from a right to cancel within 90 days of purchase. The insurer reports each contract to the IRS on Form 1098-Q.

As the worked example below shows, taking $210,000 out of the RMD base cuts the first RMD by about a fifth, and the gap continues, adjusted for growth and the shrinking divisor, every year until the QLAC starts paying.

Lower required income can matter beyond the income tax itself. It keeps adjusted gross income down, which can reduce IRMAA surcharges on Medicare premiums two years later and the share of Social Security that becomes taxable through provisional income.

The tax is deferred, not forgiven. When the QLAC starts, every payment is taxable income, arriving in your 80s on top of Social Security and the remaining RMDs. For a married couple, those payments may land on a survivor filing as single, facing the narrower brackets of the widow’s penalty. A QLAC therefore works best as insurance with a tax side benefit, rather than as a tax strategy alone.

A QLAC is one of several ways to shrink RMDs or protect against a long life, and each solves a different part of the problem. Some lower the tax bill for good, some only postpone it, and only annuities pool the risk of a very long life with other buyers. The tools can be combined: a plan can hold a QLAC and still convert to Roth or give through QCDs. The main alternatives compare as follows.

The trade-offs of a QLAC are the trade-offs of any deferred annuity, stretched over a longer wait. Money committed at 70 may pay nothing for 15 years, and the purchase is generally permanent once the cancellation window closes. The payments are also only as secure as the insurance company that owes them, decades from now. The mistakes below are the ones most likely to turn a sensible hedge into a poor fit.