Longevity Annuities and QLACs

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding Longevity Annuities

A longevity annuity is a financial product designed to provide a steady income stream in your later years, typically starting payments around age 80 or 85. These annuities are a form of deferred income annuity, offering a solution to the risk of outliving your retirement savings. By purchasing a longevity annuity, you commit a portion of your savings now to receive guaranteed income later, ensuring financial stability in your advanced years.

Key Features of Longevity Annuities

  1. Deferred Payments: Payments begin at a specified age, usually between 80 and 85.
  2. Lifetime Income: Provides a reliable income stream for life, helping to cover living expenses in your later years.
  3. Inflation Protection: Some longevity annuities include features to protect against inflation, maintaining your purchasing power over time.
  4. Customization: You can choose the start date and payout structure to fit your financial needs and goals.
What Is A Qlac

What is a Qualified Longevity Annuity Contract (QLAC)?

A Qualified Longevity Annuity Contract (QLAC) is a specific type of deferred income annuity that you can purchase with funds from your retirement accounts, such as an IRA or 401(k). QLACs offer the added benefit of deferring Required Minimum Distributions (RMDs) until payments start, usually at age 85. This deferral can help reduce your taxable income in the earlier years of retirement.

Benefits of QLACs

  1. Tax Advantages: Defers RMDs, reducing your taxable income until payments begin.
  2. Longevity Protection: Ensures a guaranteed income stream in your advanced years.
  3. Flexible Payout Options: Choose from various payout structures to best meet your needs.
  4. Peace of Mind: Provides financial security, knowing you will not outlive your savings.
Qlac Annuity

How We Can Help

At The Annuity Expert, we understand the anxiety and uncertainty that comes with planning for a long retirement. Our core mission is to help you find the best retirement income solutions at the lowest costs. We specialize in providing comprehensive advice on longevity annuities and QLACs tailored to your unique situation. With over 15 years of experience as an insurance agency, annuity broker, and retirement planner, we are well-equipped to guide you through the complexities of retirement planning.

Understanding Your Concerns

We recognize that the primary challenge many retirees face is the fear of outliving their savings. This fear can cause significant emotional stress, affecting your quality of life. We are here to alleviate these concerns by providing you with reliable, long-term financial solutions. Our expertise ensures that you receive personalized advice that addresses your specific needs and goals.

Our Commitment to You

We believe in finding the most effective and affordable solutions to secure your financial future. Our commitment is to provide you with honest, transparent, and professional guidance every step of the way. We stand for helping you achieve financial security and peace of mind without compromising on quality or cost.

Qualified Longevity Annuity Contract

What We Recommend

Step 1: Initial Consultation

  • What Happens: During this step, we will have a detailed discussion to understand your financial situation, retirement goals, and concerns.
  • Main Benefit: You gain a clear understanding of how longevity annuities and QLACs can fit into your retirement plan.

Step 2: Customized Plan Development

  • What Happens: Based on the initial consultation, we will develop a customized retirement income plan that includes the best longevity annuity and QLAC options for you.
  • Main Benefit: You receive a tailored strategy that maximizes your retirement income and provides long-term financial security.

Step 3: Implementation and Ongoing Support

  • What Happens: We assist you in purchasing the recommended annuities and provide ongoing support to ensure your retirement plan remains on track.
  • Main Benefit: You benefit from continuous professional guidance and adjustments to your plan as needed, ensuring you stay on course for a secure retirement.

Features and Benefits

  1. Personalized Advice: Tailored recommendations that fit your unique financial situation.
  2. Experienced Professionals: Over 15 years of expertise in retirement planning.
  3. Comprehensive Solutions: From initial consultation to plan implementation and ongoing support.
  4. Cost-Effective Options: Finding the best solutions at the lowest costs.

Addressing Common Objections

  • Concern about early withdrawal restrictions: We ensure that the plan accommodates your liquidity needs and other financial goals.
  • Worry about investment growth: We provide options with inflation protection and other growth features to maintain your purchasing power.

Failing to secure a reliable income stream for your later years can result in financial instability, stress, and a lower quality of life.

By choosing The Annuity Expert, you ensure a financially stable and worry-free retirement. You will experience peace of mind, knowing that your future is secure and well-planned.

Contact us today for free advice or a free quote and take the first step towards a secure and prosperous retirement.

Qualified Longevity Annuity Contract

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Questions From Our readers

How does the length of the deferral period affect the cost of the QLAC?

The longer you wait to begin income payments, the higher your payments can be for the same amount. The difference in cost is based on life expectancy and the length of time between the date of purchase and the date payments begin. Remember that with a Qualified Longevity Annuity Contract, as with any deferred income annuity, your premium is permanently converted to a guaranteed income stream that can last for your lifetime.

Is there a minimum purchase age restriction?

No.

Is there a limit to how much money I can use to purchase an IRA QLAC?

Under the Secure 2.0 Act, a qualified longevity annuity contract now offers the opportunity to contribute up to $200,000 starting in 2023.

Are Roth IRAs or inherited IRAs eligible to be classified as a QLAC?

No.

If I die before my selected payment start date, will my heirs lose the premium I paid for the QLAC?

An owner can select from two pre-commencement death benefit options. The return-of-premium (ROP) option allows the premium to be paid to your beneficiary(ies) in the event you die before the income start date. This option increases the Qualified Longevity Annuity Contract’s cost and decreases the deferred income payment. The second option offers no death benefit but provides higher income payments. However, if you die before the income start date, no death benefit or income payments will ever be paid, and your QLAC will terminate.

What payment types can be selected with a QLAC?

The annuity payout options are limited to a single or joint life only and a single or joint life with a cash refund.

Are annual payment increase options available?

Some QLAC payment options have a Cost of Living Adjustment (COLA) to help with inflation adjustment.

If the owner dies before the income start date on a joint-life QLAC, when must the joint annuitant start income payments?

The spousal joint annuitant must start income no later than the original income start date.

Can a QLAC become a non-QLAC contract by changing the income start date to before the owner is 72?

A Qualified Longevity Annuity Contract that provides the option to change the income start date does not disqualify the contract from being a QLAC, even if the owner exercises the option and begins receiving income before 72.

Suppose the owner dies before income payments begin under the QLAC, and a death benefit is payable to a beneficiary. Is that death benefit eligible to be rolled over to another plan or traditional IRAs?

If the owner’s death occurs before the owner’s required beginning date, the proceeds should be eligible for rollover. However, if the owner’s death occurs after the RBD, the death benefit payment is treated as an RMD and is not eligible for rollover. Similarly, if the surviving spouse’s death is after the RBD for the surviving spouse, then the death benefit payment is treated as an RMD and not eligible for rollover.

Is commutation permitted with QLAC contracts?

No. There is no commutation benefit.

Can I access the funds inside the QLAC?

A Qualified Longevity Annuity Contract (QLAC) has no cash surrender value or commutation benefit.

What is a qlac ira?

A QLAC IRA (Qualified Longevity Annuity Contract IRA) is an individual retirement account (IRA) with a QLAC annuity contract. The QLAC annuity provides a guaranteed income stream starting at a specified age, typically after age 85. A QLAC IRA allows individuals to use a portion of their IRA savings to purchase a QLAC annuity contract, which can help reduce the impact of inflation and market risk on retirement income.

I know that Qlac in IRA has a limited amount. How much of my IRA balance can I put into a fixed lifetime annuity?

You can allocate the lesser of 25% of your IRA account balance or $200,000. This limit is applied across all your IRAs and 401(k)s combined.

Can one contribute to a QLAC annuity only the RMD money, thereby avoiding an RMD altogether?

No, you cannot use only RMD money to fund a QLAC to avoid RMDs. However, you can use a portion of your retirement savings to purchase a QLAC, which can help reduce the overall amount subject to RMDs. Funds invested in a QLAC are excluded from the RMD calculation until payments begin, often after age 85.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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