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Qualified Longevity Annuity Contract
Intro
There’s not one QLAC carrier that is better than the other. The best QLAC is the one that provides you the highest contractual guarantee after quoting all carriers. It’s that simple and should be viewed just as if you were buying a plane ticket. You punch in your specific information to get the best deal.
QLAC quote parameter information that is needed for our proprietary QLAC calculators would be your date(s) of birth, amount of money to be quoted, when you want the income to start. You can also choose whether you want the quote to be run “Life Only”, “Joint Life Only”, “Life with Cash Refund”, or “Joint Life with Cash Refund.”
QLAC funding rules for 2022 is the lesser of 25% of your total qualified (i.e. IRA type) assets or $200,000 per account owner.
Key Points
You can either run the quote yourself or have us run it for you. Just remember a few key QLAC points as you consider this strategy:
QLACs can only be used with IRA/Qualified $$
Specific QLAC rules apply to funding the policy
QLACs can provide a death benefit with any unused money
You can use Traditional IRA $$ to fund a QLAC
Your spouse or partner can be set up for “Joint Life” payments
QLAC $$ is not used to calculate your Required Minimum Distributions (RMDs)
QLAC income can start as soon as age 72 (formerly age 70 ½)
QLAC income can start as late as age 85
You can structure your QLAC so that an unused $$ goes in full to your listed beneficiaries
You can ladder QLACs to start at different ages in the future
QLAC Details
QLACs, DIAs, and SPIAs are all in the same lifetime income family. All have no moving parts, no annual fees, and are a simple and easy to understand the transfer of risk strategies that contractually guarantee a lifetime income stream. They all solve for “longevity risk,” which is the fear of outliving your money. By the way, annuities are the only product type that contractually provides lifetime income. It started in the Roman Times with SPIAs and continues to this day with QLACs.
A QLAC is a type of fixed annuity that is issued by life insurance companies and provides a guaranteed monthly lifetime income stream regardless of how long you live. QLACs are regulated at the state level and need to be quoted with all carriers approved in your specific state of residence to find the highest contractual guarantee for your situation. Using my proprietary annuity calculators at TheAnnuityMan.com, you can do just that with no sales hassle. You always control the process.
Qualified Longevity Annuity Contracts (QLACs) have a limitation on how much money you can place in the policy. For 2022, it’s the lesser of 25% of the total account balances for your qualified (IRA type) money...or $200,000. If both you and your spouse/partner have IRA type accounts, then each of you can own a QLAC. My prediction is that every few years, this premium funding limit will be increased by the IRS and the Treasury Department to help people place more of their IRA assets into QLAC income guarantees.
Social Security (the annuity that everyone owns) was never intended to be the primary source of retirement income, even though too many people use it that way. With trillions of dollars in Traditional IRAs, the government is hoping that people start implementing QLACs as part of their guaranteed income floor.
There’s never an urgency to buy an annuity, the only urgency is to fully understand the strategy
Coverage Summary
One of the biggest benefit propositions QLACs offer (in my opinion) is the ability to add your spouse/partner for “Joint Life” income guarantees, even though you are using your personal IRA assets. This is a guaranteed lifetime income legacy that should be taken advantage of by most Traditional IRA owners.
To my mind, QLACs should be a part of every retirement income plan and retirement account strategy because of the guaranteed income it contractually provides. That lifetime income stream is primarily based on your life expectancy(s) at the time you start the income, with interest rates playing a secondary pricing role.
With the new Required Minimum Distribution (RMD rules) 2022 guidelines, you can now have to start taking money out of your IRA at age 72...instead of the previous age rule of 70 ½. So with your Qualified Longevity Annuity Contract (QLAC) strategy, you can have income starting as soon as age 72 and as late as age 85. You can start the income at any time between those ages, and can also split up your QLAC purchase to have multiple policies to ladder income at different intervals. At age 85, the IRS will be “tapping you on the shoulder) to make you turn on that QLAC income stream.
Before you buy a QLAC, you need to read my QLAC Owner’s Manual and have us quote all QLAC carriers using our proprietary calculators to find the highest contractual guarantee for your specific situation.
In my opinion, Qualified Longevity Annuity Contracts (QLACs) should be the number one annuity type sold in the United States. In a perfect world, and if all built-in annuity commissions were the same for all product types, QLACs would be the most popular annuity on the planet. The vast majority of retirement assets are held in IRAs or employer-sponsored retirement plans, so QLAC contractual lifetime income guarantees fit perfectly for most people planning for retirement.
