Straight Answer Wealth Group

A QLAC — qualified longevity annuity contract — lets you move up to $210,000 from your IRA or 401(k) in 2026, delay required minimum distributions (and the taxes) on that money until as late as age 85, and turn it into guaranteed lifetime income you can’t outlive. It’s one of the few RMD workarounds Congress actually wrote into the tax code.

Here’s the part that should annoy you: the QLAC has been legal for over a decade, and most retirees have never heard the acronym. One financial columnist recently called it ‘one of the least discussed tools in the U.S. retirement code.’ Translation — a legal way to shrink your tax bill has been sitting in plain sight, and nobody handed you the memo.

Let’s fix that.

What is a QLAC, in plain English?

A QLAC is a deferred income annuity you buy inside a pre-tax retirement account. You hand an insurance company a lump sum today, and in exchange it promises you a fixed paycheck for life — starting on a future date you pick, no later than age 85.

The magic isn’t the annuity part. Plenty of annuities pay lifetime income. The magic is a special IRS blessing: money parked in a QLAC gets carved out of the balance the IRS uses to calculate your RMDs. Less balance counted, smaller forced withdrawals, smaller tax hit.

Think of it as a permission slip to keep a slice of your IRA off the tax radar for up to a dozen extra years.

How does a QLAC lower your RMDs and your tax bill?

Once you hit RMD age — that’s 73 today, or 75 if you were born in 1960 or later — the government forces you to pull money out of your traditional IRA and 401(k) every year, whether you need it or not. Every dollar comes out as ordinary income.

That’s the trap. Forced withdrawals can shove you into a higher bracket, add taxes to your Social Security, and trip the IRMAA Medicare surcharge cliffs. Miss an RMD entirely and the penalty is a brutal 25% of what you should have taken.

A QLAC quietly defuses part of that. Here’s a simplified example: move $210,000 out of a $1.4 million IRA into a QLAC, and only $1.19 million counts toward your RMD math. Your required withdrawal — and the tax on it — shrinks accordingly, every single year until the annuity turns on.

If you want the full menu of ways to cut this tax, my guide on how to reduce taxes on RMDs walks through five levers; the QLAC is one of them. And if you’re still fuzzy on why RMDs sting so much, start with how RMDs raise your retirement taxes.

How much can you put in a QLAC in 2026?

The cap has loosened a lot, and this is where SECURE 2.0 did retirees a real favor. The old rule was stingy and confusing. The new rule is a clean, inflation-adjusted dollar figure.

Killing the 25% rule matters. Under the old math, someone with a modest IRA could only shelter a sliver. Now a married couple can move a combined $420,000 off their RMD radar — real money, and it grows with inflation each year.

QLAC vs. a regular annuity: what’s the difference?

People mix these up constantly. A QLAC isn’t a separate product so much as a special-purpose deferred annuity that meets IRS rules. Here’s the honest side-by-side.

The QLAC’s whole personality is patience. You’re betting on your own long life — and it’s not a wild bet. For a healthy 65-year-old couple, there’s roughly a 50% chance one spouse lives to 90, according to longevity data cited by Capital Group. Planning to run out of money at 85 is planning to be wrong.

When does a QLAC actually make sense?

It’s not for everyone, and anyone who tells you otherwise is selling, not advising. A QLAC tends to fit when a few of these are true:

• You have more IRA money than you’ll realistically need before 80, and the RMDs are just feeding the IRS.
• You’re genuinely worried about outliving your savings — longevity is the risk that quietly wrecks retirement plans.
• You have other liquid savings for emergencies, so locking up $100k–$200k for years doesn’t leave you stranded.
• You expect to be in a high tax bracket in your 70s and want to push some income to your 80s.
• You have reason to believe you’ll live a long life — family history, good health, decent genes.

If you’re in poor health or you need every dollar liquid, a QLAC is probably the wrong tool. That’s not a knock on the product; it’s just the wrong hammer for that nail.

What are the downsides? (The honest tradeoffs)

No product is free lunch, and a good advisor names the catch before you sign. Here’s the catch, plural:

• Illiquidity. Once the money’s in, it’s largely locked. You can’t call it back for a new roof or a rainy day.
• Inflation risk. A fixed payment starting at 85 buys less than the same number today, unless you pay extra for an inflation rider.
• Mortality risk. Die before payments start with no rider, and much of the premium can be lost. Kitces research notes buyers typically must live to around 88 just to recover their premium in nominal dollars.
• Opportunity cost. That money isn’t in the market. In a roaring decade, you’d have made more invested — but you’d also carry the risk you were trying to offload.

The fix for the mortality worry is a return-of-premium (ROP) rider, which guarantees your heirs get back your premium minus any payments you already received. It costs you a bit of monthly income, but it turns ‘I might lose it all’ into ‘my family gets it back.’ Tradeoffs, always tradeoffs.

Frequently asked questions

Can I fund a QLAC with a Roth IRA?

No. QLACs are designed for pre-tax accounts — traditional IRAs, SEP and SIMPLE IRAs, 401(k)s, 403(b)s, and governmental 457(b) plans. Roth accounts already have no lifetime RMDs, so there’d be nothing to solve.

How are QLAC payments taxed?

Because you funded it with pre-tax dollars, the income counts as ordinary income when it starts — same as a normal IRA withdrawal. You’re not dodging the tax forever; you’re choosing when to pay it, which is the whole game.

What’s the latest age income can start?

Payments must begin no later than the first day of the month after your 85th birthday. You can choose to start earlier — 80, 82, whatever fits — but 85 is the outer limit for the RMD carve-out.

What happens to the money if I die early?

Without a rider, the insurer may keep the balance. With a return-of-premium rider, your beneficiaries receive your premium back minus any payments already made. Choose the rider if leaving something to heirs matters to you.

Does a QLAC help with Medicare surcharges and Social Security taxes?

It can. By lowering your RMD-driven income in your 70s, a QLAC may keep you under the IRMAA thresholds and reduce how much of your Social Security is taxed. It’s a knock-on benefit, not a guarantee — the numbers have to line up.

Is $210,000 the limit per account or per person?

Per person, across all your eligible accounts combined, for 2026. A married couple can each fund one, sheltering up to $420,000 total.

The bottom line

A QLAC won’t make you rich. What it does is unglamorous and valuable: it hands you a paycheck you can’t outlive, and it politely tells your RMDs to wait a decade. For the right retiree — long life expectancy, more IRA than they need early, other cash on hand — that combination is hard to beat.

For the wrong retiree, it’s dead weight. The only way to know which one you are is to run your actual numbers. That’s the job — not selling you a product, but figuring out whether you even need one.

This article is for educational purposes only and is not financial, tax, or legal advice. Annuities and QLACs involve tradeoffs, including limited liquidity, and are not right for everyone. Product features, limits, and tax rules can change. Consult a licensed professional about your specific situation before making any decision.