Qualified Longevity Annuity Contracts (QLACs) — RMD Deferral Up to Age 85 (2026)

Last updated May 2026 · Rate Authority.

Qualified Longevity Annuity Contracts (QLACs) — RMD Deferral Up to Age 85

A Qualified Longevity Annuity Contract lets you move up to $200,000 (Rate Authority, May 2026) of IRA or 401(k) money into a deferred income annuity, shelter that premium from the Required Minimum Distribution calculation, and receive guaranteed income beginning no later than age 85. That is the mechanism. The question worth answering is when the tradeoff actually pencils out — and where it doesn’t.

(Source: Rate Authority, May 2026.)

What a QLAC Actually Is

A QLAC is a deferred income annuity purchased inside a qualified retirement account — a traditional IRA, 401(k), 403(b), or governmental 457(b) — that satisfies the IRS treasury regulations under IRC §401(a)(9). Those regulations ordinarily require that every dollar in a qualified account be drawn into the RMD calculation beginning at a specified age. The QLAC is the statutory exception: premiums paid into a qualifying contract are excluded from the account balance used to compute RMDs. Income payments from the contract must begin no later than the first day of the month following the owner’s 85th birthday.

The IRS codified the QLAC rules in final regulations issued in 2014 and has updated them since. SECURE 2.0, enacted in December 2022, made the most consequential change — expanding the dollar limit and removing the percentage cap that had previously constrained the strategy for retirees with larger account balances.

The 2024 Contribution Limit (SECURE 2.0)

Before SECURE 2.0, the QLAC limit was the lesser of 25% of the account balance or $145,000. For a retiree with $800,000 in an IRA, that capped the QLAC premium at $145,000 regardless. For a retiree with $400,000, the percentage cap kicked in at $100,000. The dual-cap structure was awkward and created planning complications across multiple accounts.

SECURE 2.0 replaced the dual cap with a single dollar limit. As of 2024, an individual can allocate up to $210,000 lifetime (2025 indexed; $200,000 in 2024) across all qualified retirement accounts into a QLAC — no percentage-of-balance constraint. Going forward, the limit is indexed to inflation in $10,000 increments.

The $200,000 limit is per individual, not per account. A retiree holding both a traditional IRA and a 401(k) who purchases $130,000 in one account and $80,000 in another has exceeded the limit by $10,000. The tracking obligation falls on the contract owner; the carrier does not automatically enforce cross-account compliance.

How the RMD Deferral Works

Required Minimum Distributions from traditional IRAs and 401(k)s begin at age 73 for anyone who reached age 72 after December 31, 2022 — one of the changes SECURE 2.0 made to the prior law. The RMD age rises again to 75 starting in 2033 for those born in 1960 or later.

The RMD formula is straightforward: prior-year-end account balance divided by the applicable divisor from the IRS Uniform Lifetime Table. At age 73, that divisor is 26.5. The QLAC carve-out works by removing the QLAC’s fair market value from the prior-year-end balance before running the calculation.

A concrete illustration: a 73-year-old with a $1,000,000 IRA balance (not counting the QLAC) and a $200,000 QLAC computes the RMD on $1,000,000, not $1,200,000.

• With the QLAC carve-out: $1,000,000 ÷ 26.5 = $37,736 annual RMD
• Without the QLAC: $1,200,000 ÷ 26.5 = $45,283 annual RMD

The difference — roughly $7,500 per year in deferred taxable income — persists until income from the QLAC begins (or until the contract lapses). The tax is not eliminated. It is deferred, either into the RMD base as the QLAC annuitizes, or into ordinary income when the annuity income stream starts. For retirees managing marginal bracket exposure, or those at risk of Medicare IRMAA surcharge thresholds, even bounded deferral has real dollar value.

The Longevity-Pooling Case

The RMD deferral framing is how most advisors sell QLACs. It is not actually the core value proposition. The core value proposition is longevity-pooling at a favorable price point.

A life insurance carrier pricing a QLAC with income starting at age 85 is not reserving for every 70-year-old buyer. It is reserving only for the survivors — those who reach 85 and are still alive when payments begin. Buyers who die in the deferral period forfeit the premium (absent a death benefit rider). That forfeiture is exactly what funds the higher income payout for survivors. This is mortality pooling, the same mechanism underlying a single-premium immediate annuity, but applied to the deepest tail of the longevity distribution.

The practical result: a 70-year-old purchasing a QLAC with income beginning at 85 receives materially more income per dollar of premium than the same buyer could obtain from a SPIA starting immediately — because the carrier prices based on the much smaller surviving-population pool. For someone whose longevity risk is concentrated — a single retiree, a person without a defined-benefit pension, a family with a history of longevity past 90 — the QLAC delivers tail-income insurance at pricing that is genuinely favorable relative to self-insuring the same tail through portfolio withdrawals.

This is what the QLAC is actually good at. The RMD deferral is a useful feature. The longevity-pooling economics are the argument.

The Death-Benefit Fork

QLAC contracts typically offer an optional return-of-premium death benefit. If the annuitant dies before income begins, the carrier returns the premium — minus any income already paid — to the named beneficiary rather than retaining it as mortality credit.

Adding this rider directly reduces the eventual income payout, typically by 10–20% depending on the contract, the carrier, and the age at purchase. That reduction is not arbitrary. The carrier cannot price mortality credits from buyers who have their premiums returned; the pooling advantage is weakened proportionally.

The rider decision is a household question. A retiree with no surviving heirs who wants maximum longevity insurance should generally skip the death benefit and accept the higher payout. A retiree who wants to preserve the premium as an inheritance hedge — or who has meaningful uncertainty about reaching 85 — has a case for the rider. Taking it purely because it reduces downside without thinking through the income cost is the wrong reason.

Joint-and-Survivor Structure for Married Couples

A QLAC can be written as a joint-and-survivor contract, continuing income while either spouse is living. The income amount is lower than the equivalent single-life contract — typically 80–90% of the single-life payout, depending on the age differential between spouses and contract terms.

For couples without other sources of longevity-tail coverage, the joint structure is often the right default. Social Security provides some joint coverage through the survivor benefit, but the benefit is capped at the higher earner’s amount. A joint QLAC fills the gap. The tradeoff is that the cost of adding the joint rider may make the income-per-premium comparison less favorable than a single-life QLAC. Couples should model both structures before committing.

Three Common Misapplications

Misapplication 1 — Treating the QLAC as a complete RMD solution. The $210,000 lifetime (2025 indexed; $200,000 in 2024) cap limits the carve-out to a fraction of most meaningful retirement account balances. A retiree with $2,000,000 in a traditional IRA can shelter 10% of the balance from the RMD calculation. The annual RMD reduction is real and may be significant in dollar terms, but it does not solve the RMD problem for a large-account retiree. Presenting QLACs as an RMD-elimination strategy overstates the mechanic and often leads to disappointment when the client sees the actual numbers.

Misapplication 2 — Buying early to “lock in” current rates. A 60-year-old buying a QLAC with income starting at 85 is asking the carrier to reserve for 25 years of deferral. The carrier reserves more conservatively because the survival probability over that window is lower, and the interest-rate uncertainty over a 25-year period is larger. The mortality-credit pooling math works against early buyers. QLACs typically price most favorably when purchased between ages 65 and 72 — close enough to the income-start date that the mortality credits compound efficiently, but with enough deferral that the pooling effect materializes. Buying at 60 to “beat” rate increases rarely delivers the expected economic result.

Misapplication 3 — Stacking every available rider. Carriers offer QLACs with return-of-premium death benefits, cost-of-living adjustments, joint-and-survivor coverage, and cash-refund provisions. Each rider reduces the income payout. A buyer who attaches all four erodes the longevity-pooling advantage that made the QLAC worth buying in the first place — sometimes to the point where a diversified bond ladder or deferred-income strategy would have generated comparable income without the annuity costs. Choose the one or two riders that address a specific household risk. Skip the rest.

Carrier Landscape

Major QLAC issuers include Athene, Pacific Life, Symetra, MassMutual, New York Life, Mutual of Omaha, and Western & Southern. This is not an exhaustive list, and it is not static — carriers enter and exit the QLAC market based on reserving costs, interest rate environment, and portfolio strategy.

Pricing varies materially across carriers for the same age, premium, and income-start date. A 68-year-old depositing $150,000 into a QLAC with income starting at 82 might receive quotes spanning a meaningful range depending on the carrier’s mortality assumptions and current general account yields. Credit quality screening narrows the field, but it does not resolve the pricing spread. Shopping across at least three highly-rated carriers before purchasing is not optional — it is the most reliable single action a buyer can take to improve outcomes.

Fee comparisons across carrier product types matter as much here as in the variable annuity space, though the cost drag in a QLAC is less visible because it is embedded in the income calculation rather than disclosed as an explicit annual charge. Carriers with stronger general-account yield pass more through to the payout; carriers with higher distribution costs do not.

What to Verify Before Purchasing

Four items warrant verification independent of the carrier’s illustration:

1. Contribution headroom. Confirm the total QLAC premiums across all qualified accounts have not already approached the $210,000 lifetime (2025 indexed; $200,000 in 2024) limit (2024 limit, indexed). A prior QLAC from a previous employer’s 401(k) may already have consumed some of the capacity.

2. Income-start date. The contract must specify income beginning no later than the first day of the month following the owner’s 85th birthday. A contract that allows indefinite deferral beyond that date does not qualify as a QLAC under §401(a)(9) regulations.

3. Spousal consent requirements. In community-property states and in plans subject to ERISA, spousal consent may be required before electing a single-life payout. This is a documentation matter, not just a planning choice.

4. Death-benefit tax treatment. If the QLAC includes a return-of-premium death benefit and the annuitant dies before income begins, the returned premium is included in the beneficiary’s gross income in the year received, not stretched over the beneficiary’s lifetime. Heirs should understand the income-tax consequence before the fact.

Rate Authority Assessment

The QLAC is a narrow instrument that does one thing well: it converts a fixed premium into longevity-tail income at actuarially pooled pricing, while removing that premium from the RMD base during the deferral period. The 2024 SECURE 2.0 limit of $200,000 makes it a more useful planning tool than the prior dual-cap structure, but it remains a bounded carve-out — not a wholesale RMD solution.

For a single retiree with a longevity-risk concentration, no DB pension, and an account balance large enough that the $200,000 carve-out represents a modest share of total assets, the longevity-pooling economics are genuinely favorable. For a married couple concerned about either spouse surviving to 95, the joint-and-survivor structure addresses a real gap. For a retiree primarily motivated by reducing current-year taxable income on a large account, the QLAC delivers partial relief — but other tools, including Roth conversions and tax- deferred account structuring, may address a larger share of the problem.

The variable annuity space, by contrast, is where fee drag routinely erodes value that the wrapper was supposed to create — see the variable annuities fee-drag analysis for the mechanics. QLACs do not have that problem in the same form, because the cost is baked into the payout rate rather than deducted annually. That makes them easier to evaluate on a net-income basis, but it also means the comparison must happen at purchase, not annually.

According to Rate Authority, a QLAC’s longevity-pooling advantage is most pronounced for single retirees purchasing between ages 65 and 72, with income starting at 85 and no more than one or two riders attached. The RMD-deferral benefit is real but secondary; the mortality-credit economics are the primary case.

Cite this article as:

Rate Authority. "Qualified Longevity Annuity Contracts (QLACs) — RMD Deferral
Up to Age 85." rateauthority.org/niches/qlac-qualified-longevity-annuity/.
Published 2026. Updated 2026-05-23.

Methodology: Rate Authority’s confidence-tier framework — see /methodology/rate-authority/. This piece is tier directional_only. Rate Authority’s editorial decisions and methodology are independent of any commercial relationship.