Traditional IRA vs. Annuity: How QLACs and DIAs Have an Impact

Let's talk about traditional IRAs, annuities, QLACs, DIAs, and all that good stuff. We will go over it in detail because you might think it's easy and everyone understands it—but no. It's like showing paintings to blind people. No offense to blind people, but that's how tough it can be when discussing annuities. You have to be very clear and factual, and that's what I do. Why? Because I'm Stan The Annuity Man—America’s annuity agent, licensed in all 50 states, including that very nice state you're sitting in right now.

Traditional IRAs, QLACs, and DIAs Explained

So, let’s talk about traditional IRAs, QLACs, and Deferred Income Annuities. Let’s break it down to the basics. Deferred Income Annuities are essentially a Single Premium Immediate Annuity that you defer, and the only difference is the income start date. Immediate Annuities can start as soon as 30 days from the policy issue date, up to one year. A Deferred Income Annuity starts at 13 months and can go up to 40 years. Some ask, "Who in the heck would buy a Deferred Income Annuity and defer it for 30 or 40 years?" Well, that would be me. And you go, "What?"

My Personal Story

I have two daughters in their twenties. One attended NYU in New York City, while the other lived in Hawaii. So, I bought them both Deferred Income Annuities with my money. I love them to death, but will they make much money in the future? I don’t know. One’s a dancer, and the other is a writer. You make that call. So, with a Deferred Income Annuity, I put money in now and defer it until they turn 50. At age 50, they’ll get a lifetime income stream. By that time, I’ll be dead and gone, but every time that annuity payment hits, they'll be like, "I just love Dad... I mean, The Annuity Man."

The Simplicity of Deferred Income Annuities

No, they won’t say that, but that’s who buys them: their future pension payments. A Deferred Income Annuity has no moving parts, market attachments, or annual fees. It’s simple. You can explain it to a nine-year-old, no offense to nine-year-olds. I could go into second grade and say, "Here’s a Deferred Income Annuity. You put money in, then the income stream turns on. The older you are, the higher the payment." Every second grader would be like, "Got it." That’s the beauty of that product.

QLACs and Their Role

Now, how does a QLAC fit into all of this? A Qualified Longevity Annuity Contract (QLAC) is a DIA. I know what you’re saying, "SPIA, DIA, QLAC—you're acronyming me to death, Stan." I get it. I’m sorry. But that’s the world I live in. Let’s go backward again. An Immediate Annuity becomes a Deferred Income Annuity (DIA). A QLAC is a DIA. A DIA is a QLAC. A DIA is a SPIA. A SPIA is a DIA. Sounds like a three-card Monte, right? But they’re simple pension products based on your life expectancy when you take the payment. The older you are, the higher the payment. Interest rates play a secondary role.

QLACs Inside Traditional IRAs

Okay, so now that you’re not confused, let’s talk about QLACs and DIAs inside traditional IRAs. QLACs have a specific funding rule. As of 2025, you can contribute up to $210,000 to a QLAC. That rule may change, so it's probably different if you see this in 2026. But there are funding rules because QLACs were introduced in 2014 by our friends at the IRS and the Department of the Treasury.

They created QLACs so people could plan for future income needs, as Social Security—though the best inflation annuity on the planet—was never meant to be your primary retirement income. A QLAC allows you to take IRA assets and buy a future pension plan. With a QLAC, you can start the income as soon as age 72 and as late as 85. Many people think they have to defer to age 85, but that's just when they tap you on the shoulder and say, "By the way, that QLAC, you need to turn on the income stream."

The Benefits of QLACs

You don’t have to start it that late, but you can. Another great thing about a QLAC is you can add your spouse or partner as a lifetime income stream participant, even though it’s your IRA, which I think is fantastic. Another benefit is that the money you contribute to a QLAC, like $210,000, isn’t used to determine your required minimum distributions when you turn 72. Previously, that was 70 and a half, but now it’s 72.

DIAs vs. QLACs Inside IRAs

Now, between DIAs (Deferred Income Annuities) and QLACs, when you turn 72, we primarily use QLACs for future income needs. As of 2025, most carriers will not accept a Deferred Income Annuity inside an IRA beyond a certain point. If you want to contribute $500,000 to a Deferred Income Annuity and defer it until age 75, they won’t do it. They won’t quote it, and it’s not worth pursuing at this point. What they’re trying to do is push people toward using QLACs.

Customizing Your Annuity Plan

Can you use a QLAC and defer $500,000 for 15 years until you’re 70? Yes, but remember, once you turn 72, the DIA you have in your IRA will primarily be a QLAC. Some companies may offer alternatives, but it’s really not worth quoting right now. Maybe this will change, but for now, it's just food for thought. But this is a perfect example of why you need to set an appointment with us.

Get Help Navigating Annuities

Don’t try to navigate these annuity waters alone. Let me get on that retirement raft with you, and we can put together a plan. Maybe it’s a combination of a Deferred Income Annuity starting at age 70 and then using a QLAC that defers until 75, 80, or 85. It can get complex, but remember: annuity contracts are customizable. And who's the best at customizing in the annuity business? You got it—The Annuity Man. We can help you with that.

Conclusion

I encourage you to schedule a 30-minute conversation with us at The Annuity Man to discuss this. Most people’s assets are in their retirement accounts—whether it’s a 401(k), 403(b), 457, or traditional IRA. Those can all be transferred. We need to talk about how to maximize those assets, which leads us to the next question.

Should You Buy an Annuity Inside an IRA?

"Why would I buy an annuity inside an IRA? It makes no sense." No, Chester, it does make sense because when you buy an annuity inside an IRA, you’re buying the contractual guarantees of that annuity. Forget about the tax part. You're buying the guarantees. With Deferred Income Annuities or QLACs inside an IRA, you’re buying a pension plan. You’re buying a lifetime income stream.

Free Resources for You

I know that was a lot, but here’s the good news: I’ve written books on both. You can download them for free, with no obligation.

The bottom line is, when you buy annuities for the contractual guarantees—what they will do, not what they might do—you’re buying them correctly. It doesn’t matter which account you use: Roth IRA, traditional IRA, or non-IRA. You’re buying the contractual guarantee.