Most retirees spend a lot of time planning for their 60s and 70s. Very few plan specifically for their 80s — and that’s exactly when financial plans tend to break down.

Investment accounts get depleted by market downturns or medical costs. Annuity income streams may not have kept pace with inflation. Cognitive decline makes managing a complex portfolio increasingly difficult. And the one thing that was supposed to be “enough” at 65 turns out to be barely adequate at 85.

A QLAC — Qualified Longevity Annuity Contract — solves this problem in a uniquely elegant way. It lets you set aside a portion of your IRA today, pay no taxes on it now (and reduce your future Required Minimum Distributions), and receive a guaranteed income stream starting in your mid-to-late 80s, precisely when you’re most likely to need it.

This is one of the most underused retirement planning tools available — and one of the most specifically designed for late-retirement income security.

What Is a QLAC?

A Qualified Longevity Annuity Contract (QLAC) is a type of deferred income annuity that you purchase inside an IRA (or certain employer plans). Specifically authorized by Treasury regulations in 2014 and expanded by SECURE 2.0 in 2022 and 2024, a QLAC allows you to:

Move up to $200,000 from your traditional IRA (or qualified plan) into the QLAC
Exclude that amount from RMD calculations — reducing your annual required withdrawals
Defer the income start date as late as age 85
Receive guaranteed lifetime income starting at the deferral date

The QLAC is purchased from an insurance company, and the income payments are backed by the insurer’s claims-paying ability — not market performance.

How the $200,000 QLAC Limit Works

Prior to SECURE 2.0 (effective 2023), the QLAC limit was the lesser of $145,000 or 25% of your IRA balance. SECURE 2.0 eliminated the percentage limit entirely and raised the dollar cap to $200,000 (indexed for inflation).

This means:

You can contribute up to $200,000 to a QLAC regardless of your total IRA balance
If you have multiple IRAs, the $200,000 limit applies in aggregate across all accounts
You can fund the QLAC in a lump sum or through installment premiums over time

Important: The QLAC must be purchased from an insurance company that offers IRS-qualified contracts — not all deferred income annuities qualify.

How a QLAC Reduces Your RMDs

This is the most immediately valuable feature for many retirees.

Your Required Minimum Distribution each year is calculated based on your IRA account balance as of December 31 of the prior year, divided by your life expectancy factor from IRS tables.

Money inside a QLAC is excluded from this calculation — the $200,000 is simply not counted when determining your RMD.

The RMD Reduction in Practice

Assume you’re 72 with a $1,000,000 IRA balance. Your RMD at 73 (using the Uniform Lifetime Table, divisor of approximately 26.5) would be:

$1,000,000 ÷ 26.5 = $37,736/year

If you had purchased a $200,000 QLAC in your IRA the prior year:

$800,000 ÷ 26.5 = $30,189/year

Annual RMD reduction: $7,547/year

Over 10 years, that’s $75,470 in RMDs deferred — which means $75,470 of income that isn’t pushed into your tax brackets, doesn’t trigger more Social Security taxation, and doesn’t push you into IRMAA territory.

The tax savings compound: deferred income at a 22% tax rate saves $16,600 in taxes over that decade, not counting the reduced Social Security taxation.

QLAC Income: What You Actually Receive

The income generated by a QLAC depends on:

Premium amount (how much you put in)
Your age at purchase (older = more income per dollar)
Your income start date (longer deferral = more income)
Income option selected (life only vs. joint/survivor vs. return of premium)
Current interest rate environment (rates affect pricing significantly)

Illustrative QLAC Income Examples

(Representative values — actual quotes vary by insurer and market conditions. Get current quotes before making decisions.)

$100,000 QLAC purchased at age 70, income starting at age 85:

Income Option	Monthly Income at 85
Life only (male)	~$2,800/month
Life only (female)	~$2,400/month
Joint life (both age 70)	~$1,900/month
Life with return of premium	~$1,600/month

$200,000 QLAC purchased at age 70, income starting at age 85:

Income Option	Monthly Income at 85
Life only (male)	~$5,600/month
Life only (female)	~$4,800/month
Joint life (both age 70)	~$3,800/month

The deferral period is key: a 15-year deferral (age 70 to 85) allows compound growth inside the contract, producing income far larger than the same premium in an immediate annuity would generate.

How QLAC Income Is Taxed

Because QLAC funds come from a traditional (pre-tax) IRA, the income received is fully taxable as ordinary income when payments begin — just like RMDs.

The QLAC doesn’t eliminate taxes; it defers them. The key question is whether your tax rate at 85 will be higher or lower than it would be during peak RMD years at 75-80.

For most people, the answer is: lower at 85, because:

Other income sources (part-time work, investment account drawdowns) have typically wound down
The overall portfolio is often smaller by then
Some retirees’ other income drops at 85+ as travel and discretionary spending decline

Additionally, by the time QLAC payments begin, the income is genuinely needed for ongoing expenses — so paying tax on it is less of an issue than paying tax on RMDs you didn’t need and re-invested in taxable accounts.

QLAC vs. Standard FIA with GLWB: Key Differences

Many clients ask how a QLAC compares to a Fixed Index Annuity (FIA) with a Guaranteed Lifetime Withdrawal Benefit (GLWB) rider. Both provide lifetime income guarantees — but they serve different purposes.

Feature	QLAC	FIA with GLWB
Primary purpose	Late-retirement income guarantee	Flexible income starting 5-15 years out
Typical income start age	80-85	65-80
RMD reduction	✅ Yes — excluded from IRA balance	❌ No — still counts toward RMD
Market participation	None — fixed annuity only	Yes — index-linked interest credits
Flexibility	Very limited	Moderate — can delay/accelerate income
Return of premium option	Available on most contracts	Varies by carrier
IRA-qualified	Required	Optional (can be inside or outside IRA)
Income amount	Very high (long deferral)	Moderate to high depending on roll-up rate
Best for	Longevity insurance for 80s+	Baseline retirement income starting at 65-75

The most complete strategy often uses both: an FIA with GLWB for income starting at 65-75, and a QLAC for coverage starting at 85 — creating a guaranteed income floor that covers the entire retirement period.

Who Is a QLAC Right For?

A QLAC is most compelling for retirees who:

✅ Have significant traditional IRA balances (over $300,000) that will generate large future RMDs

✅ Are ages 65-75 — old enough to have realistic longevity risk, young enough that the deferral period is meaningful

✅ Have family history of longevity — parents or grandparents who lived to 85+ or beyond

✅ Want to reduce income taxes during peak RMD years while maintaining security in their 80s

✅ Are willing to accept reduced liquidity in exchange for guaranteed late-retirement income

✅ Have other income sources to cover expenses while the QLAC is in deferral

Who Should Probably Skip It

❌ Retirees with serious health conditions that suggest shorter-than-average life expectancy (though return-of-premium options mitigate this concern)

❌ Retirees with very small IRA balances where the $200,000 limit isn’t relevant

❌ Retirees who need maximum flexibility and liquidity in their assets

❌ Those who have already maximized other tax-efficient strategies (Roth conversions, etc.) and have minimal IRA balance

The Longevity Risk No One Talks About

There’s a peculiar problem with retirement planning: most people plan for their average life expectancy, not for the realistic upside scenario.

If you’re 65 and female today, your life expectancy is approximately 87. But that’s an average — meaning half of 65-year-old women will live beyond 87, and a meaningful percentage will reach 95 or beyond.

Planning only to average expectancy means accepting a 50% probability that you outlive your plan.

A QLAC specifically addresses this: you’re not betting that you’ll live to 85 — you’re ensuring that if you do live that long, you’ll have income. This is insurance against longevity in the most literal sense.

The cost of the QLAC is the premium paid (plus the opportunity cost of alternative uses of those funds). The cost of not having a QLAC and living to 90 without adequate income is far greater.

Practical Steps: How to Get a QLAC Quote

Assess your IRA balance — is $200,000 or a portion thereof a meaningful amount in context of your total assets?
Choose a target income age — 80, 82, or 85 (longer deferral = more income per dollar; shorter deferral = earlier access)
Decide on income option — life only maximizes income but provides no death benefit; return of premium ensures heirs receive the premium if you die before income starts
Get quotes from multiple insurers — QLAC pricing varies significantly by carrier. Shopping multiple insurers (A-rated or better) is essential.
Coordinate with your full retirement income plan — the QLAC works best as one piece of a comprehensive strategy that also includes Social Security optimization, FIA income, and Roth conversion planning.

The Bottom Line

A QLAC is a narrow but powerful tool for the right situation. It reduces your RMD burden during the years when income taxes are highest, and it provides guaranteed income precisely when you’re most likely to need it — in your 80s.

If you have a substantial IRA, a reasonable expectation of longevity, and concern about late-retirement income security, a QLAC conversation is worth having.

Schedule a 30-Minute Retirement Income Review →

We’ll review your IRA balance, RMD projections, longevity considerations, and income needs to determine whether a QLAC fits your situation — and if so, how to structure it alongside your Social Security strategy, FIA income plan, and Roth conversion strategy.

Rodney Cummings, RSSA® | Legacy Wealth Services | Oregon Insurance License #18847712 | 503-832-8555

QLAC income projections in this article are illustrative examples only. Actual income depends on your age, premium amount, income start date, gender, income option, and current insurer pricing. QLAC income projections change frequently as interest rates change. Get current, personalized quotes before making any annuity purchase decision. This article is educational and does not constitute personalized financial, tax, or legal advice.