The distribution you didn’t ask for
At 73, the IRS starts requiring you to take money out of traditional IRAs and 401(k)s every year, whether you need it or not. (For anyone born in 1960 or later, it starts at 75.) Every dollar comes out as ordinary income. For retirees who live comfortably on Social Security and a pension, those required minimum distributions can mean a tax bill for money they’re only moving from one account to another.
A QLAC is one of the few tools the tax code gives you to shrink that number, and it happens to solve a second problem at the same time: running low on money in your late eighties.
What a QLAC is
A qualifying longevity annuity contract is a deferred income annuity bought inside a traditional IRA or employer plan. You pay a premium now. The insurer promises a guaranteed monthly income that starts later, as late as the month after you turn 85.
The money used to buy a QLAC is left out of the balance your required distributions are calculated on until the income begins. Smaller balance, smaller required distribution, smaller tax bill in the years before payments start.
The 2026 rules
- The limit is $210,000 per person for 2026, across all your QLACs combined. The limit is indexed for inflation and has held at $210,000 since 2025.
- The old 25% cap is gone. SECURE 2.0 removed the rule that limited a QLAC to a quarter of your account balance.
- Income must start by 85. You can choose an earlier start date.
- Traditional accounts only. Roth IRAs are excluded because they have no lifetime required distributions to reduce. Inherited IRAs are excluded too.
- Plain income, no market features. A QLAC pays fixed income. It can’t have variable or indexed crediting, and it has no cash surrender value.
- Spouses and heirs can be protected. A joint-life option keeps income going for a surviving spouse, and a return-of-premium feature can pay beneficiaries what’s left if you die early. Both lower the monthly income.
What the carve-out is worth
Take someone whose first required distribution is at 73. The IRS divides the account balance by a life-expectancy factor of 26.5 that year. Moving the full $210,000 into a QLAC before then lowers that year’s required distribution by about $7,900. The savings repeat each year until the income starts, and the tax saved depends on your bracket.
The bigger value usually comes later. The QLAC turns $210,000 into income that begins when many people start worrying about whether their savings will hold out, and it keeps paying for as long as you live.
Who it fits
A QLAC tends to make sense when most of these are true:
- You don’t need all of your required distributions to live on.
- You’re in good health, and the people in your family tend to live a long time.
- You’re married and want income that lasts for whichever of you lives longer.
- You’d rather spend more freely in your seventies knowing your late eighties are covered.
It tends to fit poorly if you’ll need that money for emergencies, if your health makes a long retirement unlikely (unless you add return of premium), or if your traditional balances are small enough that required distributions aren’t a problem.
The trade-off, stated plainly
Most deferred annuities today let you take up to 10% a year without a surrender charge, and the complaint that annuities lock up your money is usually overstated. A QLAC is the exception. The money buys future income, and you can’t cash it out. That’s what makes the tax treatment possible.
The income is also fixed, so inflation matters. A payment that looks generous at 73 will buy less at 90. That’s why a QLAC works as one piece of the plan, sized next to Social Security and the rest of your savings, rather than as the whole thing. Our guide to building a retirement income floor shows how the pieces fit.
General educational information. Your circumstances, applicable requirements and specific contract terms belong in an individual review with the appropriate professionals.
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