What is a QLAC and how do you use it?
A QLAC lets you defer RMDs on up to $210,000 of IRA money by buying deferred-income annuity coverage. The 2026 rules.
Two worries drive most retirement tax planning: required minimum distributions that force taxable income you do not need yet, and the fear of outliving your money in your late 80s and 90s. A QLAC — Qualified Longevity Annuity Contract — tackles both with one purchase. It is a deferred income annuity bought inside a traditional IRA or 401(k). It guarantees a lifetime paycheck that starts as late as age 85, and it legally removes the premium — up to $210,000 in 2026 — from your RMD calculation until that paycheck begins. Below: how it works, the IRS rules, the real tax math on a $1 million IRA, who it fits, who should skip it, and how to buy one.
The two jobs a QLAC does
- Longevity insurance. You buy now; income starts at an advanced age you choose, up to 85. The result is a large guaranteed check that arrives precisely when other assets may be running low.
- RMD deferral. Money moved into a QLAC drops out of the IRA balance used to calculate required minimum distributions until QLAC income begins. Smaller balance, smaller taxable RMDs through your 70s.
Illustrative single-life payout by starting age — representative levels for A.M. Best A− and above carriers, not a survey or quote. Payout levels as of October 2026. A female buyer's check runs about 4.2% lower at 65 and 7.1% lower at 80, reflecting longer life expectancy. Actual quotes vary by carrier, state, sex and payout option.
Because income starts late, each premium dollar buys a lot of it. That is the longevity-insurance trade: you give up access today for a large, late, guaranteed stream. Think of it as the opposite of a savings account. A savings account keeps your money liquid and pays little. A QLAC locks your money away and pays a lot — but only if you live to collect.
How a QLAC actually works
You move a portion of a traditional IRA or eligible employer plan into the QLAC as a single premium. That premium buys a future income stream with a start date you choose — commonly your late 70s up to age 85. From the first year-end after you fund it, that dollar amount no longer counts in your RMD math.
When the start date arrives, the insurer pays a fixed monthly or annual amount for the rest of your life — or both spouses' lives, if you chose joint life. The payout is set at purchase and does not move with the stock market. It is a guarantee backed by the insurer's claims-paying ability, not an investment account you watch grow.
One trap to know up front: the contract must be specifically issued and labeled as a QLAC under IRS rules. A regular deferred annuity inside an IRA does not get the RMD exclusion.
QLAC rules at a glance
The limits are set by the IRS and indexed over time, so confirm the current figures before you sign anything. The required-minimum-distribution framework itself is explained in IRS guidance on RMDs.
| Rule | Detail |
|---|---|
| Maximum premium (2026) | $210,000 from any combination of IRAs/401(k)s |
| Maximum start age | 85 |
| RMD exemption | Premium excluded from RMD calculation until start |
| Death benefit allowed? | Return of premium (cash refund) or a life annuity to a surviving spouse or other beneficiary only — no period-certain guarantee and no commutation |
| Joint life option | Yes, with spouse |
| Source of funds | Pre-tax IRA or eligible 401(k) money (not Roth) |
The tax math — a worked example
Say you are 72, with your first RMD due next year at 73 — the age RMDs begin for those born 1951–1959; they start at 75 if you were born in 1960 or later — and $1,000,000 in a traditional IRA. Each RMD is figured on the prior December 31 balance, so that first RMD is roughly $37,700, using the age-73 IRS Uniform Lifetime divisor of 26.5 — and the required amount climbs every year as the divisor shrinks. Every dollar is taxed as ordinary income, and the total can push you into a higher Medicare premium bracket (IRMAA).
Now move $200,000 into a QLAC that starts paying at 85, before December 31. Your RMD base drops to $800,000 at that year-end, so the first RMD falls to about $30,200 — roughly $7,500 less forced, taxable income. Stack a gap like that across the 12-year deferral window and you avoid on the order of $90,000–$100,000 in forced distributions. Meanwhile, the $200,000 is no longer a balance you can tap or watch grow: it has bought a fixed income stream that starts at 85, and the long wait is what makes that check so large.
Here is the same idea side by side. (Figures are rounded illustrations, not a quote.)
| Item | No QLAC | With $200k QLAC |
|---|---|---|
| IRA balance used for RMD | $1,000,000 | $800,000 |
| Year-one RMD (age 73) | ~$37,700 | ~$30,200 |
| Forced taxable income, year one | Higher | ~$7,500 lower |
| Access to the $200,000 before age 85 | Full | None |
| Guaranteed income starting at 85 | None from this money | Large lifetime check |
One caution: QLAC income is still taxed as ordinary income when it finally pays out. A QLAC changes when you are taxed, not whether. The win is shifting income out of your high-RMD years and protecting your IRMAA tier.
The longevity-insurance lens
A QLAC is not a yield play. At the start date, income per premium dollar is enormous. An immediate annuity bought at 85 already pays a man about 15.5% of the premium a year in our October 2026 figures, and a QLAC bought years earlier pays more than that, because many buyers will not live long enough to collect for years. You are pooling longevity risk with everyone who bought the same contract. The people who die early subsidize the people who live long. A payout rate is not an interest rate: most of each early check is your own principal coming back to you, so the percentage is not comparable to a bond or CD yield.
That is the point. If you live to 92, a QLAC that started at 85 has paid for seven years — and replaced the fear that you would drain the rest of your portfolio. For buyers 65–72 with strong portfolios and family longevity, it is among the most tax-efficient ways to insure against outliving your money.
Who it fits — and who should skip it
| May fit | Poor fit |
|---|---|
| Healthy person with longevity in the family and ample near-term assets | Anyone who may need that money before the income start age |
| High-balance IRA owner wanting to trim taxable RMDs | Someone in poor health or with a short life expectancy |
| Retiree worried about outliving a portfolio in their late 80s and 90s | Someone who prizes liquidity or wants to maximize a bequest to heirs |
Pros and cons
Weigh the guarantee against the lock-up before you commit.
- Pro — lifetime income you cannot outlive, starting exactly when other money may be thin.
- Pro — lower taxable RMDs in your 70s and early 80s, which can also protect your Medicare IRMAA tier.
- Pro — high payout per dollar, thanks to the long deferral and longevity pooling.
- Con — total illiquidity: you cannot get the premium back or take a lump sum later.
- Con — inflation risk: a level payout loses purchasing power over a long deferral unless you pay for an increasing-income rider.
- Con — credit risk: the guarantee is only as strong as the issuing insurer, so carrier quality matters.
Mistakes to avoid
- Overfunding. Do not push to the dollar cap if it leaves you short on liquid money for the years before the QLAC turns on.
- Buying in poor health. Without a refund feature, dying before the start age means the money is simply gone — a bad bet if your life expectancy is short.
- Ignoring inflation. A fixed check that starts at 85 and stays level can feel small by 95. Weigh whether a cost-of-living increase is worth the lower starting payout.
- Skipping insurer due diligence. Check the carrier's financial-strength ratings and understand your state guaranty-association coverage limits.
- Using Roth money. The RMD benefit is built for pre-tax accounts. Roth IRAs have no lifetime RMDs for the owner, so the deferral advantage does not apply.
How to buy a QLAC — next steps
Treat this as a deliberate, once-decided purchase, not an impulse buy.
- Confirm the current cap and your eligibility. Verify the latest IRS premium limit and that your funds are eligible pre-tax money.
- Pick a start age. Later start dates raise the payout but extend the years you have no access. Balance that against your other income.
- Choose your options. Single or joint life; a return-of-premium (cash refund) death benefit, or none; level or increasing income.
- Compare insurers and quotes. Request quotes from several highly rated carriers — payouts for the same premium vary meaningfully.
- Run it past a fiduciary. Before you lock in an illiquid, irrevocable contract, have a fee-only advisor confirm it fits your full retirement plan. You can also study annuity basics through FINRA's investor guidance.
