Learn About QLACs (Pronounced 'cue-lacks')

Qualified Longevity Annuity Contracts

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  • What Are QLACs?

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    New Retirement Income Guarantee

    In July 2014, the US Government approved a new life annuity product designed for current and future retirees who are concerned about outliving their retirement savings. The new product, a Qualified Longevity Annuity Contract or "QLAC," may be purchased using qualified retirement account assets (e.g. IRA funds) without triggering a taxable event.  A QLAC purchase also reduces the Required Minimum Distributions after the IRA owner reaches age 70½.  Click here to see our Blog Article on the 8 Signs You Need a QLAC or click the button below to open a video.

     

  • What Are Required Minimum Distributions (RMDs)?

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    RMDs - Required Minimum Distributions

    IRAs and similar retirement savings plans are subject to Required Minimum Distribution or “RMD” tax rules.  Under IRS rules, assets held by an IRA owner compound tax-deferred.  In retirement, distributions from retirement savings plans (such as IRAs) are treated as taxable, ordinary income.  RMD rules force older taxpayers (over the age of 70 and 1/2) to receive distributions and pay tax on past contributions and earnings in their qualified retirement accounts. If a RMD is not distributed after age 70 and 1/2 a 50% penalty is imposed on the distribution shortfall.  Click here to estimate RMDs.  Good news  -- a QLAC purchase can substantially reduce the required RMD distribution amount and the corresponding tax obligation - without creating penalty for the taxpayer.  See our videos page for examples.

  • Want to conserve assets?

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    A QLAC Defers Taxation

    A QLAC provides a lifetime annuity once distributions start.  Between the purchase date and the time payments begin (no later than age 85), no taxation is triggered. While all distributions are taxed as ordinary income, this taxation only occurs when annuity payments are received by the QLAC owner or beneficiary.  In this way, a  QLAC performs like any deferred annuity – growth in the value of the contract is only taxed once received by the beneficiary of the annuity. See our 1-2-3 RMD Calculator Page to compute what deferrals would be for you or just click the button below.

  • Would you...

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    Allow More of Your Retirement Assets To Keep Growing

    Qualified Longevity Annuity Contract “QLAC” owners may wait up until age 85 to start payments from a QLAC annuity. Also, a QLAC can be purchased before retirement. The more time between the purchase date and the annuity start date, the larger the annuity payment from the QLAC. Also, the QLAC is not considered in computing the Required Minimum Distributions after age 70½.   As a result, early in retirement (when income may not be needed) taxable income is deferred to later on in the retirement when the QLAC payments occur. Click here to learn about our Failsafe(SM) Strategy for maximizing income during retirement.  To learn how much income a QLAC will generate click the button below and receive a comparative quote from Immediateannuities.com.

  • Maximum QLAC Purchase?

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    Alas, QLACs Do Have Limits

    The Qualified Longevity Annuity Contract or "QLAC" premium purchase is limited to 25% of a retirement plan (i.e. assets held in tax-qualified accounts such as an IRA), but no more than $125,000 from all plans.  (The $125,000 lifetime limitation will be increased to $130,000 on January 1, 2018 and will increase from time to time thereafter.)  However, QLAC contribution limits follow the individual.  So, for example, if a husband and wife each have an IRA, with a balance of $500,000, both individuals may purchase their own separate QLAC, each with a premium of $125,000.  For the example couple, then, the maximum combined QLAC purchases equal $250,000.  See our video about a couple examining a QLAC purchase to see how this works.

  • Are You...

     

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    Concerned About Running Short of Income During Retirement?

    In the past, retirees were advised to limit withdrawals to no more than 4% of their savings each year.  So doing, they would not outlive their assets. Today, two things have changed.  First, people are living much longer.  Second, equity investment returns are volatile and fixed income yields are at record lows.  As a result, even the 4% faithful are at risk of dissipating their savings and becoming dependent on just social security.  A Qualified Longevity Annuity Contract is a private sector solution that offers an additional source of guaranteed income to a senior – and one that cannot be outlived. Click to learn about our Failsafe(SM) Strategy for maximizing income during retirement.  To learn how much income a QLAC will generate click the button below and receive a comparative quote from Immediateannuities.com.

  • What Makes QLAC Annuities Different?

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    What Makes QLAC Annuities Different?

    An immediate or deferred annuity runs into a number of obstacles when funded by an IRA.  As a special creature of the tax regulations, a QLAC overcomes these hurdles. 1) QLAC premiums can be paid with IRA assets without triggering withdrawal taxation. 2) Because the QLAC is not an IRA asset, the IRA’s RMD is reduced. As a result, the QLAC maximizes a retiree’s ability to shift income and taxes to later retirement years.  Traditional annuity choices cannot achieve these dual objectives.  To see a video comparing a QLAC with IRA only and Immediate Annuity options click here.

  • Are you...

     

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    You Cannot Outlive Your QLAC Annuity Income

    The IRS requires that Qualified Longevity Annuity Contract “QLAC” payments be for the life of the owner of the contract (or the owner and his/her spouse.) The QLAC owner elects when the payments begin, but not later than his or her 85th birthdate. Once started, QLAC annuity payments continue until death of the annuitant(s), no matter how long the annuitant (or annuitants) live.  Click here to see our blog piece comparing QLACs to Social Security.

  • Hope to live to 100?

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    Plan To Live To 100?

    Qualified Longevity Annuity Contracts “QLACs” work great, whether you live to 100 or not! Payments have no time limit. Distributions cease only when the owner (or owner and spouse) die(s.) What is the downside? If a QLAC owner (or owner and spouse) dies prior to a full recovery of the premium paid, a policy election allows the unrecovered amount to be paid to a beneficiary.  Accordingly, a QLAC might distribute a simple return of premium at premature deaths, or where long lives are involved, annuity payments that total many multiples of the QLAC premiums paid. To see the difference in between benefits in QLAC plans with and without return of premium policies on immediateannuities.com click here.



What Experts Are Saying About QLACs

  • "Longevity annuities—a financial innovation that provides protection against outliving your money late in life—have the potential to reshape the retirement security landscape."
  • "One of the main purposes of the QLAC is to help overcome the 'longevity problem' -- that is, the fact that many Americans will outlast their retirement savings because they're living longer than ever before."
  • "Typically bought at retirement, a longevity annuity offers a guaranteed stream of income beginning in ten or 20 years at a markedly lower cost than a conventional annuity that begins paying out immediately."
  • "The advantage of these QLAC plans is that they provide some guaranteed regular income until death, so they can supplement Social Security. And the deferred feature allows you to generate much more income per dollar invested."
  • "By using a QLAC, you have taken care of income needs post-age 85, and this allows you to free up the rest of the...portfolio for investment, liquidity and legacy planning."
  • Regardless of one's political affiliation, there is no denying that QLACs are good for the country and a positive choice for anyone with retirement plan assets or a traditional IRA.
  • "Simulations...using current asset returns and the 2012 Society of Actuaries tables to predict longevity show that a retiree with a balanced portfolio can reduce the risk of shortfall by as much as 39% through the purchase of a QLAC."
  • “the transfer of longevity risk provides a significant increase in retirement readiness for the longest-lived quartile…. Sensitivity analysis on the QLAC premiums resulting from likely increases in future interest rates provides even more favorable results.
  • More people are living into their late 80s, 90s and even past 100. But longevity isn’t so great if you run out of money.To avoid that risk, you can buy longevity insurance. It’s a special kind of deferred annuity that assures you’ll have a guaranteed income forever, even if you live to 100 or beyond.
  • "About 80 percent of women will be the sole decision-maker for their money at some point; usually later in life. Many fear living so long that they will run out of money and have to depend on family members. There's an insurance product to cover this risk. Qualified Longevity Annuity Contracts (QLACS)..."
  • "Simply, the QLAC is a tax-deferred annuity that avoids the RMD [required minimum distributions]."
  • "Estimating the benefit of avoiding RMDs is complex...the savings at today’s bond rates from a $125,000 QLAC was about $10,000 at a 36% tax rate. This tax savings will.. increase in a higher bond-yield or higher tax-rate environment..."
  • "After the payments begin, the QLAC provides a steady income as long as you live. That may be a while for today’s 70-year-old gal since there’s a 50 percent chance that she’ll live to age 88."
  • "The ability to accumulate mortality credits still means it can be very effective as a fixed income alternative for those who fear they may not have enough money to fund a retirement well beyond their life expectancy. And if retiree intends to spend all of his/her assets anyway, and the only available dollars for retirement are held in an IRA or other retirement account, the QLAC is an effective means to engage in such a strategy. "
  • "What to do if your defined benefit pension plan is frozen?...If you determine that you’ll have a shortfall between the income you’ll need in retirement and your expenses, you’ll have many options...save more, reduce retirement expenses, invest more aggressively, work longer, delay Social Security....You might also consider buying products that provide guaranteed income, similar to that provided by a defined benefit pension plan, such as a qualified longevity annuity contract (QLAC)...".


How Much Income Can You Receive In Retirement?

And How QLACs Can Defer Taxes

Go to Calculators or Click Below



 

Which Life Insurance Carriers Offer QLACs?

Life Insurance Carriers Currently Offering QLAC Products to Individuals

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    Americo

    AM Best Rating: A

    Year Establised: 1922

    Headquarters: Kansas City, MO

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    AIG

     

    American General (part of AIG)

    AM Best Rating: A1

    Year Establised: 1850

    Headquarters: New York, NY

    Link to Agent

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    Forestors Financial (Formerly First Investors)

    AM Best Rating: A

    Year Establised: 1874

    Headquarters: New York, NY

    Link to Agent

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    Guardian

     

     

    Guardian Life

    AM Best Rating: A++

    Year Establised: 1860

    Headquarters: New York, NY

    Link to Agent

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    Lincoln_Financial_Group

     

     

    Lincoln Financial Group

    AM Best Rating: A+

    Year Establised: 1905

    Headquarters: Radnore, PA

     

    Link to Agent

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    Mass Mutual Financial Group

    AM Best Rating: A++

    Year Establised: 1851

    Headquarters: Springfield, MA

    Link to Agent

  • NYL

    New York Life

    AM Best Rating: A++

    Year Establised: 1845

    Headquarters: New York, NY

    Link to Agent

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    Pacific Life

    AM Best Rating: A+

    Year Establised: 1868

    Headquarters: Newport Beach, CA

    Link to Agent

  • Principal

     

    Principal Financial Group

    AM Best Rating: A+

    Year Establised: 1879

    Headquarters: Des Moines, IA

    Link to Agent

  • symetra

     

     

    Symetra

    AM Best Rating: A

    Year Establised: 1990

    Headquarters: Des Moines, IA

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    Thrivent Financial

    AM Best Rating: A++

    Year Establised: 2002*

    Headquarters: Minneapolis, MN

     

    *Thrivent is the product of a merger of Aid Association for Lutherans (AAL) and Lutheran Brotherhood (LB), which had been established in 1902 and 1917 respectively.

Watch Videos and Case Studies Explaining QLACs

Click tab to choose a video.

  • RMD & QLAC Basics
  • Single Investor Example
  • Married Couple Example
  • Comparison: Immediate Annuity, IRA Only, IRA & QLAC
  • 8 Signs You Need a QLAC
  • For Women Over 60
  • Important Notice

The foregoing videos and their examples do not portray any one person’s situation.  The dramatizations were prepared by the Company to introduce viewers to a new financial product, a Qualified Longevity Annuity Contract.   Individual circumstances of a viewer are likely to vary from the examples in the videos. The videos are not tax or legal advice.  The financial information, and calculations depicted in these videos are supplied from sources we believe to be reliable.  However, we are unable to guarantee their accuracy. These materials are not intended to replace the viewer’s legal, tax and accounting advisors.   Any viewer should seek advice from his or her qualified advisors prior to entering into a QLAC purchase.  The Company accepts no responsibility for any outcome arising from a QLAC purchase or a failure to make a QLAC purchase.  This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state, or local tax penalties. 

Key Facts

Don't Leave this Page Without Knowing Them 

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  • QLAC Background
  • Required Minimum Distributions
  • QLAC Benefits
  • QLAC Maximum Investment
  • Return of QLAC Premium In The Event of Premature Death
  • QLAC Annuity Versus Other Annuities
  • Why do they call it a 'longevity annuity?'

In July, 2014, the US Government approved new rules inviting life insurance carriers to develop a new investment product.  This new product is designed to help retirees avoid outliving their assets. The QLAC (pronounced "cue-lack") is short for Qualified Longevity Annuity Contract  and, up to certain limits, may be purchased using qualified retirement account assets (e.g. IRA funds) without incurring a tax penalty.  The QLAC may also be used to reduce Required Minimum Distributions payable by retirees over the age of 70 and one half. Visit our videos page or click the button below to learn more.

 

IRAs and similar retirement savings plans are subject to Required Minimum Distribution or “RMD” tax rules.  Under IRS rules, assets held by an IRA owner compound tax-deferred.  In retirement, distributions from qualified retirement savings plans (such as IRAs) are treated as taxable, ordinary income.  RMD rules force older taxpayers, those over the age of 70 and 1/2, to receive distributions and pay tax on past contributions and earnings in their qualified retirement savings accounts. If a Required Minimum Distribution is not distributed after age 70 and 1/2, a 50% penalty is imposed on the amount by which distributions during the year fell short of the RMD.  Good news  -- a QLAC purchase can substantially reduce the required RMD distribution amount and the corresponding tax obligation - without creating penalty for the taxpayer.  Click here to go to our 1-2-3 RMD Calculator Page, or click the button below to open a popup calculator.

 

  • The IRS requires that QLAC annuity payments be for the life of the owner of the contract (or the owner and his/her spouse.)  Once started, QLAC annuity payments continue until death of the annuitant(s), no matter how long the annuitant (or annuitants) live.

  • QLAC investments are not counted as IRA assets for the purpose of the calculation of Required Minimum Distributions (RMD).

  • QLAC investors may wait until age 85 to receive payments from their QLAC annuity investment, in effect deferring taxable income from early in retirement when it is not needed to later on in the retirement years when it is. 

  • In reducing RMD, QLAC investments can reduce the amount of taxes payable in the early years of retirement.

  • QLACs by providing lifetime income, allow purchasers to insure themselves against longevity risk, the risk of living long enough to outlive their retirement assets.

Want to learn more? Go to our Frequently Asked Questions Page or click the button below to see what your QLAC benefit would be.

The amount an investor may invest in a QLAC is limited to the lesser of 25% of qualified assets (assets held in tax-qualified accounts such as an IRA) or $130,000. This $130,000 lifetime maximum was increased from $125,000 on January 1, 2018 and will increase from time to time thereafter.   Click here to see a short video describing a single investor QLAC purchase. However, it is important to note in this day of two income households that QLAC contribution limits follow the individual.  So, for example, if both members of a married couple have IRA’s under their own name, each with balance $520,000, both individuals may purchase their own separate QLACs, each with a maximum balance of $130,000.  After the two separate QLAC purchases, the combined QLAC assets of the couple will be $260,000.  Click here to see a video with a dramatization of couple making a double QLAC purchase.

 

The tax rules allow QLAC contracts to pay a Return of Premium (“ROP”) death benefit when the contract owner dies before collecting payments equal to the QLAC premiums paid. The ROP equals the balance of premiums not recovered via annuity payments. Click the button below, complete the mini-form and click Get My Quote in order to see a comparison between life-only and ROP annuity benefits for someone with your fact pattern.

 

What is the key difference between the purchase of a Qualified Longevity Annuity Contract (QLAC) and other annuities? 

A QLAC solves many problems faced when a retiree wants to use IRA funds to buy an annuity.  Examples include:

  • Withdrawing funds from the IRA to pay a premium for a non-QLAC annuity subjects the entire withdrawal to taxation.  

  • Purchasing an immediate annuity inside the IRA does solve the withdrawal tax issue, but requires the purchaser to receive distributions in early retirement years when the retiree may prefer deferring receipts.  

  • A deferred annuity owned by the IRA, unlike a QLAC annuity, has its value included in the Required Minimum Distribution calculation, thereby requiring a higher percentage of non-annuity assets to be distributed.  

A QLAC purchase, on the other hand...

  • Permits the buyer to use IRA assets for the QLAC purchase without taxation on the transferred assets, up to the lesser 25 percent of IRA assets or $125,000.  

  • Permits the owner to defer receipt of annuity income to the owner's 85th birthday, thereby assuring that the purchaser will have income during the later retirement years when it is most needed.

  • A QLAC annuity's value, unlike other annuities, is not counted by the IRS when a taxpayer over 70 and 1/2 computes his or her assets that are subject to yearly Required Minimum Distributions (RMDs).  (Please see discussion of RMD above.)

Longevity is a measure of how long people live.  Recent longevity statistics from the Social Security Administration and other sources tell us that about half of men who reach the age of 65 will live past age 82.  Fifty percent of women will live past age 86.  A Qualified Longevity Annuity Contract will pay monthly income as long as the annuitant lives if he or she is in the lucky fifty percent that lives a long life.  If the annuity owner is among the unlucky 50 percent that dies early, the QLAC (with return of premium elections) returns the invested premiums to the annuitant’s heirs.  The longer the annuitant lives, therefore, the higher the return on the QLAC purchase!  This is why people sometimes refer to QLACs as “Longevity Annuities” or just plain “longevity insurance.”  It is insurance for people who intend to live long lives.  Click to learn about our Failsafe(SM) Strategy for maximizing income during retirement. 

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