Deferred income annuities

A QLAC is a deferred income annuity that allows you to invest a portion of your retirement portfolio and begin taking income beyond age 73 without conflicting RMD Rules.⁴ QLACs provide you with flexibility to defer the income start date until age 85.

As we live longer, the need to generate income later in life to cover expenses that may increase with age, like healthcare, can be a challenge. With a QLAC, you shift the risk of outliving your income to the insurer, who promises to pay you a certain amount of income for the rest of your life. The insurer also assumes your interest and market risk; even if the market and interest rates go down significantly during your deferral period, you still get the same guaranteed income stream.

A QLAC is a DIA that can be funded only with assets from a traditional IRA⁵ or an eligible employer-sponsored qualified plan such as a 401(k), 403(b), or governmental 457(b).

Also, it is important to understand that the total sum of QLAC premiums cannot exceed $200,000 (indexed for inflation beginning in 2024). You are ultimately responsible for complying with this limit, and like RMDs, substantial penalties may apply if you do not.