A qualified longevity annuity contract (QLAC) is a deferred income annuity you buy with money already inside a retirement account, in exchange for payments that start late in life — no later than the month after you turn 85. Its single tax advantage is that the premium you pay comes out of the balance used to calculate your required minimum distributions, so your RMDs in your 70s and early 80s are smaller. For 2026, one person may put a lifetime total of $210,000 into QLACs across all contracts. The money is locked: a QLAC cannot have a cash surrender value, and apart from a short rescission window after purchase, there is no way to get the premium back.
Table of Contents
- Which accounts can hold one
- How the RMD break actually works
- The 2026 premium limit
- What you give up
- Deciding whether one fits
- Frequently Asked Questions
Which accounts can hold one
QLACs live inside employer plans and traditional IRAs. According to the IRS instructions for Form 1098-Q, an eligible contract must be purchased within a plan or account under IRC 401(a), 403(a), 403(b) or 408 — which covers traditional, SEP and SIMPLE IRAs — or an eligible governmental 457(b) plan. A Roth IRA cannot hold a QLAC, and the exclusion is logical rather than punitive.
Roth IRA owners have no lifetime RMDs, so there is no distribution calculation to shelter and nothing for the QLAC rules to do. Two practical consequences follow. If your retirement savings sit mostly in a Roth, a QLAC buys you nothing on taxes. And if your employer plan simply does not offer one, your route in is a traditional IRA — a rollover first, then the purchase.
How the RMD break actually works
The mechanics are narrow and specific. Under the Treasury and IRS longevity annuity regulations finalized in 2014, the QLAC's value is excluded from the account balance used to compute required minimum distributions until the contract begins paying. That exclusion is the whole benefit. This is a deferral, not an exemption.
Once payments start, they are taxable income in full, and the contract itself satisfies the RMD rules for the amount inside it. You are moving taxable income from your 70s and early 80s into your late 80s and beyond — useful if you expect to be in a lower bracket then, or if smaller RMDs now keep you under a Medicare IRMAA threshold or reduce the taxable share of your Social Security. The deferral has a hard ceiling. The same regulations require the contract's specified annuity starting date to be no later than the first day of the month following the owner's attainment of age 85, so you cannot push payments out indefinitely to stretch the shelter.
The 2026 premium limit
The dollar cap is the number most people get wrong, because it changed twice in three years. SECURE 2.0 Act section 202 repealed the old 25%-of-account-balance limit entirely and raised the flat dollar limit from $125,000 to $200,000, indexed for inflation — a change reflected in the July 2024 final RMD regulations.
The indexed figure reached $210,000 for 2025 under Notice 2024-80, and IRS Notice 2025-67 leaves it at $210,000 for 2026, because the section 415(d) cost-of-living rounding produced no increase this year. Expect the next bump to arrive as a step, not a gradual drift. Three details to hold onto:.
- The cap is **aggregate across every QLAC you own** — premiums under one contract reduce the room available under another.
- Repeal of the 25% rule matters most to people with smaller accounts, who previously could not reach the dollar limit at all.
- The IRS tracks your usage independently. The insurer must file Form 1098-Q annually from the first premium year until the earlier of the year you turn 85 or the year you die.
What you give up
Illiquidity is not a side effect of QLAC design — it is the design. The 2014 regulations prohibit a commutation benefit, cash surrender value or similar liquidity feature, precisely because the ability to cash out would undercut the mortality pooling that makes late-life payouts so large relative to the premium. A QLAC also may not be a variable (section 817) or indexed contract. So the premium is effectively unreachable.
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It will not fund a roof, a hospital bill or a down payment, and it is not an emergency reserve. If you die before the annuity starting date, what your heirs receive depends entirely on the death benefit you selected and paid for when you bought the contract. SECURE 2.0 section 202 added one narrow escape. Per the Senate Finance Committee's section-by-section summary, a contract may grant the purchaser a right to rescind within a period not exceeding 90 days after purchase. The same provision confirms that survivor benefits payable to a former spouse under a QDRO — or, for plans without QDROs, under a divorce or separation instrument — do not disqualify a contract when the divorce follows the purchase.
Deciding whether one fits
A QLAC answers one question: what happens if you live much longer than your money was planned for. It is poorly suited to anything else.
Work through these before you commit: If you do buy, use the 90-day rescission window as a genuine review period rather than a formality. Read the contract's stated annuity starting date, the death benefit terms and the income amount, and confirm the premium against the room you have left under the $210,000 lifetime cap.
- **Is your money in the right bucket?** Traditional IRA or eligible plan, not Roth.
- **Will smaller RMDs change your tax bill?** If your RMDs are modest or you are already in a low bracket, the deferral is worth little.
- **Can you lose access to the premium permanently?** Cover emergencies and medium-term spending from liquid assets first.
- **Does your health and family history point to longevity?** The contract pays off only if you reach the starting date and live well past it.
- **Have you priced the death benefit?** Decide what, if anything, should pass to a spouse or heirs, and what that feature costs in reduced income.
Frequently Asked Questions
Can I buy a QLAC with Roth IRA money?
No. The QLAC rules do not apply to Roth IRAs, and since Roth IRA owners have no lifetime RMDs, there is no account balance to shelter.
If I already own one QLAC, how much more can I buy?
The 2026 limit of $210,000 is a lifetime total across all your QLACs, so subtract every premium you have already paid. Your insurers report premiums to the IRS on Form 1098-Q.
What is the latest my payments can start?
The first day of the month after you reach age 85. The 2014 final regulations set that as the outer limit on the contract's specified annuity starting date.
Can I cancel after I buy?
Only within a rescission period of up to 90 days after purchase, if your contract provides one. After that there is no cash surrender value and no commutation benefit.
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