A qualifying longevity annuity contract (QLAC) is a fixed deferred income annuity bought inside a traditional IRA, 401(k), 403(b), or governmental 457(b) that pays guaranteed lifetime income starting on a future date you choose. It suits savers who want smaller required withdrawals in their 70s and longevity protection after age 85, in exchange for locking up part of their savings. The trade is timing and control. You reduce taxable withdrawals during the deferral years, then receive concentrated taxable income late in life with little access to the premium.
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Who can buy a QLAC?
Workers and retirees with a traditional IRA, 401(k), 403(b), or governmental 457(b) can use plan money to buy one. According to Mercer Advisors, the contract must be a fixed deferred income annuity held inside one of those accounts, not a separate taxable annuity.
- Own an eligible traditional IRA, 401(k), 403(b), or governmental 457(b)
- Buy a fixed deferred income annuity that meets federal QLAC rules
- Stay within your lifetime per-person premium limit across all accounts
- Select a future income start date allowed by the contract and IRS rules
How much can you put in?
Congress removed the old limit that capped QLAC premiums at 25% of account balances, according to the K&L Gates analysis of SECURE 2.0 (SECURE 2.0 Section 202 summary). The law, enacted Dec. 29, 2022, replaced that percentage test with a higher indexed dollar cap.
That lifetime per-person limit is $210,000 for 2025 and 2026, with future indexing in $10,000 increments, according to MassMutual (MassMutual 2026 QLAC limit update). Each spouse with separate retirement accounts has a separate cap. Check total premiums before buying, because excess amounts can lose QLAC treatment.
How do RMDs and income timing work?
Money held in a QLAC is excluded from the Dec. 31 balance used to calculate required minimum distributions until payments begin. According to Kiplinger, that exclusion lowers taxable RMDs during the deferral years (Kiplinger on QLAC tax benefits).
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IRS rules require payments to begin no later than the first day of the month after you turn 85. You may choose an earlier start date if you want income sooner. The deferral is most useful when other savings, Social Security, or pensions cover spending before 85.
What do you give up?
A QLAC cannot be a variable, indexed, or similar contract. It cannot offer cash surrender value, commutation, or a lump-sum withdrawal, so the purchase is generally irrevocable after any short free-look period. Death risk is the sharpest limit. Without an optional return-of-premium or survivor benefit, the insurer generally keeps the premium if you die before or shortly after payments start.
Adding that protection reduces monthly income, so compare single-life income against joint or refund options before signing. Payments are taxable as ordinary income when received. The practical result is smaller RMDs and lower taxes from about age 73 to 85, followed by guaranteed income that may push you into a higher bracket after 85. Run that later-bracket scenario before committing the full limit.
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