What the IRS requires
- Start date. Payments must begin no later than the first day of the month after your 85th birthday.
- Premium limit. The final regulations removed the old 25%-of-balance limit and raised the dollar limit from $125,000 to $200,000, adjusted for inflation. The adjusted figure changes, so confirm the current-year number.
- No cash-out feature. The contract cannot make available a commutation benefit, cash surrender value, or similar feature before payments begin.
- RMD effect. While it qualifies, the QLAC’s value is excluded from the account balance used to calculate required minimum distributions.
Source: IRS Internal Revenue Bulletin 2024-33 (final QLAC regulations).
How it connects to required withdrawals
The IRS current page says you generally must start withdrawals from an IRA or employer plan at age 73, and a required minimum distribution cannot be rolled over (IRS: required minimum distributions). The starting age depends on your birth year, so confirm yours. A QLAC lowers the balance the RMD formula uses, which can lower the required amount in the years before the QLAC pays. It does not remove RMDs on the rest of the account, and the QLAC’s payments are taxable when they arrive.
The trade-offs
- The money is committed. Because the contract cannot offer cash surrender value, you cannot get the premium back as cash if circumstances change.
- If you die before payments start. Whether anything is paid to a beneficiary depends on the contract. Ask about a return-of-premium feature and what it costs.
- Inflation. A fixed payment starting at 85 buys less than the same payment would today. Ask whether the contract has an inflation adjustment and how it affects the starting amount.
- The carrier. Payments depend on the issuing company’s claims-paying ability for decades.
Where it fits with a rollover
A QLAC is bought with money in an IRA or an employer plan, so a rollover to an IRA is often the first step if the plan does not offer one. See every rollover account at a glance and single-premium annuities for how income annuities differ.
Curious whether a longevity annuity fits your plan?
Request a no-obligation Retirement Income Review. We explain your options in plain English, with no pressure and no promises of returns.
Request my Retirement Income ReviewQuestions to ask
- What premium am I considering, and does it respect the current dollar limit?
- What start age would I choose, and what is the income at each age?
- Is there a death benefit, and what does it cost?
- Is there an inflation adjustment?
- What will my RMD be with and without the QLAC? (Ask for the calculation in writing.)
Related reading
See inherited IRA rules, how annuities are taxed and the age 55 rule.
Where to check these rules
Every rule on this page comes from the IRS. Read the source for your situation:
- IRS Internal Revenue Bulletin 2024-33 (final QLAC regulations)
- IRS: Retirement topics, required minimum distributions
- IRS: Rollovers of retirement plan and IRA distributions
Availability and rules vary by state
Life insurance and annuity products, rates, riders and consumer protections differ by state, and a given product may not be available in every state. Honorbrook is licensed in the 11 states below; which products we can offer you depends on what carriers sell in your state. Each state’s insurance regulator can verify an agent’s license and answer consumer questions.
- Virginia: Virginia Bureau of Insurance
- Maryland: Maryland Insurance Administration
- North Carolina: North Carolina Department of Insurance
- South Carolina: South Carolina Department of Insurance
- Georgia: Georgia Office of Insurance and Safety Fire Commissioner
- Alabama: Alabama Department of Insurance
- Louisiana: Louisiana Department of Insurance
- Texas: Texas Department of Insurance
- Michigan: Michigan Department of Insurance and Financial Services
- Indiana: Indiana Department of Insurance
- West Virginia: West Virginia Offices of the Insurance Commissioner
This article is general information and is not tax, legal, investment or financial advice. Annuity guarantees depend on the issuing company’s claims-paying ability, and surrender charges and fees may apply. A licensed agent can help with your situation.