What Is a Qualifying Longevity Annuity Contract (QLAC)?

By Marc Gilman

Questions? Call (800) 927-9326 or email

Key Takeaways

• A QLAC is a specific type of fixed deferred income annuity, purchased with money from a qualified retirement account, that the IRS excludes from your Required Minimum Distribution (RMD) calculations until the annuity actually starts paying out.

• For 2026, the limit is $210,000 per person, with no percentage-of-account-balance cap — a rule that was simplified by the SECURE 2.0 Act.

• Payments must begin no later than age 85, and once purchased, the decision is generally irrevocable.

• Only fixed annuities qualify — variable and fixed-indexed annuities cannot be structured as QLACs under current IRS rules.

• A QLAC can only be funded from qualified retirement accounts — traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and 457(b) plans. Roth IRAs are not eligible.

• Buying a QLAC purely to shrink your RMD number is often not worth it on the math alone — you typically need to survive to around age 88 just to recover the original premium, and a portfolio left invested tends to outperform the QLAC payout well past age 100. It tends to make more sense as longevity insurance than as a tax-reduction tactic by itself.

The Basic Definition

A Qualifying Longevity Annuity Contract, or QLAC, is a deferred income annuity that meets a specific set of IRS requirements, allowing its value to be excluded from the calculation the IRS uses to determine your Required Minimum Distributions. In plain terms: you move a portion of your qualified retirement savings into a QLAC, that money stops counting toward your RMD calculations while it sits in deferral, and it starts paying you guaranteed lifetime income at a future date you choose — no later than age 85.

The regulation creating QLACs dates back to July 2014, when the IRS formally established the rules allowing this type of annuity to be excluded from RMD calculations. The SECURE 2.0 Act, passed in December 2022, meaningfully expanded and simplified those original rules. It’s worth noting that SECURE 2.0 also pushed back the RMD starting age itself — currently 73, rising to 75 starting in 2033 for those born in 1960 or later — which affects when RMDs (and therefore the value of a QLAC’s exclusion) actually start to matter for your specific situation.

How a QLAC Actually Works

1. You fund it with money from a qualified account — a traditional IRA, SEP IRA, SIMPLE IRA, 401(k), 403(b), or 457(b) plan.

2. The purchase amount is excluded from your RMD calculation for every year the QLAC remains in deferral — meaning your annual required withdrawal is calculated only against your remaining account balance, not the amount inside the QLAC.

3. Income payments must begin no later than age 85. You choose the specific start date at purchase, and once selected, this is generally locked in.

4. Once payments begin, they’re taxed as ordinary income, the same as any other qualified retirement account distribution.

The 2026 Dollar Limit

For 2026, the maximum amount you can put into a QLAC is $210,000 per person, confirmed by IRS Notice 2025-67. The path to that number is worth understanding, since different sources reference different figures depending on when they were written: the original 2014 regulation set a base limit of $125,000 (or 25% of your account balance, whichever was smaller), which grew through annual inflation adjustments to $145,000 by 2022. The SECURE 2.0 Act, effective December 2022, then reset the rules entirely — eliminating the 25%-of-balance test and establishing a new $200,000 base limit, which has since grown to $210,000 for 2026 through the same $10,000-increment inflation adjustments.

Because the limit applies per individual, not per household, a married couple can each fund their own QLAC — sheltering up to $420,000 combined between two spouses, as long as each has sufficient qualified account balances of their own to draw from.

What Actually Counts as a QLAC

Not every deferred annuity qualifies, even if it sounds similar. Per the IRS’s own instructions for Form 1098-Q, a QLAC must:

• Provide fixed payments only. The contract cannot be a variable contract, an indexed contract, or a similar contract — payments must either be a fixed dollar amount or increase at a specified, constant rate.

• Begin income no later than age 85 — specifically, no later than the first day of the month after your 85th birthday.

• Be funded exclusively from eligible qualified accounts — traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, 403(b)s, and governmental 457(b) plans. Roth IRAs are not eligible, since they operate under different RMD rules entirely.

• Include no cash surrender value or commutation benefit after your required beginning date — with one specific carve-out: a right to rescind the contract within 90 days of purchase (a “free-look” period) is explicitly allowed without disqualifying the contract.

• Offer a return-of-premium option, if elected, in lieu of a life annuity to a beneficiary. If you die before recovering the full amount you paid in, a QLAC can be structured to pay a designated beneficiary the difference between what you paid and what’s already been distributed — either as an installment refund (paid over time) or a cash refund (a single lump sum). This is offered as an alternative to a continuing life annuity for your beneficiary, not automatically stacked on top of it.

If you already own a QLAC purchased before December 29, 2022, you’re not required to exchange it for a new contract to take advantage of today’s higher limits — you can simply pay additional premiums into the existing contract, up to the current cap, as long as what you’d already paid in satisfied the rules in effect at the time.

QLAC-to-QLAC exchanges are also explicitly permitted, effective September 17, 2024 under final IRS regulations — confirmed both in the IRS’s own Form 1098-Q instructions and independently by Greenleaf Trust’s client guidance on the topic. This means if you want to move an existing QLAC to a different insurer — say, to get a better rate or consolidate contracts — you can, without losing the contract’s QLAC status, as long as the new contract doesn’t exceed the current $210,000 limit. Under current regulations, only QLAC-to-QLAC exchanges are permitted — you cannot exchange a different type of annuity into a QLAC using this same provision. When you exchange, the fair market value of your existing QLAC counts as the premium for the new one; if you instead surrender a QLAC for its cash value first and then use that cash to buy a new QLAC, only the actual cash amount counts toward your limit.

A QLAC Can Cover a Spouse, Too

This is a detail worth its own callout, especially if income protection for a spouse is part of your planning: a QLAC can be structured with a joint annuitant, typically a spouse, so that both named individuals are covered under the same contract regardless of how long either one lives. A non-spouse beneficiary can also potentially be named as a joint annuitant, though age-difference rules can limit how that’s structured. If protecting a surviving spouse’s income is part of why you’re considering a QLAC in the first place, this joint-annuitant option is usually the feature to ask about directly, rather than assuming a single-life QLAC is your only structure.

The IRS’s specific rules here are worth knowing precisely. If your spouse is the sole beneficiary, they can receive a life annuity worth up to — but not more than — 100% of what you would have received. If someone other than your spouse is the sole beneficiary (or if you have multiple beneficiaries), the payment is capped at a lower “applicable percentage” set by IRS regulation rather than the full amount. And if you go through a divorce after purchasing a QLAC, the contract generally doesn’t lose its QLAC status just because your former spouse continues as the named beneficiary — but only if a Qualified Domestic Relations Order (QDRO) specifically (1) entitles the former spouse to the survivor benefits, (2) treats them as a surviving spouse for purposes of the contract, and (3) doesn’t modify their status as either the beneficiary or the measuring life for those survivor benefits. Without a QDRO meeting all of these conditions, a divorce can jeopardize the contract’s QLAC status — this is exactly the kind of detail worth involving an estate or elder law attorney in, not something to assume works out on its own.

Two Optional Features Worth Knowing About

• Laddering. Rather than buying one QLAC all at once, some buyers purchase a series of smaller QLACs over several years — similar in spirit to dollar-cost averaging, since annuity pricing shifts with prevailing interest rates. Laddered contracts can be structured to all begin paying at the same age, or staggered so each one starts at a different age (one beginning at 78, the next at 79, and so on), depending on when you expect to need the income.

• Cost-of-living adjustments (COLA). Some QLAC contracts allow you to add an inflation-adjustment rider, which increases your payments over time to help keep pace with inflation. The tradeoff is a lower starting payout in exchange for that protection — worth weighing against your own life expectancy and how much inflation risk concerns you. Without this rider, a payment that looks generous when you’re 65 can lose 30–40% of its purchasing power by the time you’re actually receiving it in your 80s.

A Word on Risk

The most significant risk in buying a QLAC isn’t really about the product structure — it’s the financial strength of the insurance company issuing it. Since a QLAC is a long-term promise to pay income potentially decades into the future — often 15 to 25+ years between purchase and final payout — the issuing carrier’s long-term financial strength and claims-paying ability matters as much as the contract terms themselves. As a general benchmark, many advisors look for a carrier rated A- (Excellent) or better by A.M. Best, though this is worth discussing directly rather than treating as an absolute rule. This is worth evaluating before committing, not after.

It’s also worth comparing quotes across multiple carriers before committing — payout rates for otherwise-identical contracts can vary meaningfully insurer to insurer. And because QLACs are commissioned products, it’s reasonable to have the decision reviewed by a fee-only advisor whose compensation isn’t tied to whether you buy one, rather than relying solely on the agent selling the contract.

The Tax Reporting Side: Form 1098-Q

If you own a QLAC, you’ll encounter Form 1098-Q, which the annuity issuer — not you — is required to file annually with the IRS, along with furnishing you a copy for your records. This form reports details like total premiums paid, the contract’s fair market value, and the scheduled commencement date for payments. You don’t need to file this form yourself with your tax return; it exists to let the IRS verify that your excluded QLAC value is being tracked correctly against RMD rules. The issuer files it every year starting with the year you first pay premiums, continuing until the earlier of the year you turn 85 or the year you die — and if your spouse is your sole beneficiary, reporting continues to them until their own payments begin or they pass away.

Once income payments actually begin, those distributions are typically reported separately, similar to other qualified account withdrawals. One detail worth knowing if a return-of-premium benefit is ever paid out after your death: if that payment happens after your required beginning date for RMDs, the IRS treats it as a required minimum distribution for that year — meaning it cannot be rolled over into another retirement account the way a typical inherited distribution sometimes can.

What a QLAC Is Not

A few common points of confusion worth clearing up directly:

• It’s not a way to avoid taxes entirely — it defers when a portion of your retirement savings gets taxed, but income is still fully taxable once payments begin.

• It’s not the same as a pension. A pension is provided automatically by an employer. A QLAC is something you actively choose to purchase using your own retirement savings — giving you more control over the amount, timing, and structure, but also meaning it doesn’t happen unless you set it up yourself.

• It’s not liquid. Once purchased, a QLAC is generally illiquid until payments start — this is not money you can access on short notice for an emergency.

• It’s not the same as a regular deferred annuity purchased with non-qualified (already-taxed) dollars. A QLAC specifically must be funded from a qualified retirement account to get the RMD-exclusion treatment.

QLAC vs. a Standard Deferred Income Annuity

“QLAC” and “deferred income annuity” get used almost interchangeably sometimes, but they’re not the same thing — a QLAC is a specific, narrower category. A standard deferred income annuity (DIA) can be funded with any money, qualified or not, has no IRS-imposed premium limit, and can start income later than age 85 depending on the carrier. A QLAC, by contrast, must be funded from a qualified account, is capped at $210,000, must start income by 85 — and in exchange for those restrictions, it gets the RMD exclusion a standard DIA does not. If you need to defer more than $210,000, or you’re working with already-taxed savings, a standard DIA (not a QLAC) is the relevant tool — and the two can be used alongside each other.

Seeing the RMD Reduction in Real Numbers

Here’s a simplified, hypothetical illustration — not a quote — showing how the mechanics actually play out. Say you’re 73 with a $600,000 traditional IRA, and you purchase a $150,000 QLAC. The IRS Uniform Lifetime Table factor for age 73 is 26.5, so:

• Without a QLAC: your RMD is calculated on the full $600,000 — $600,000 ÷ 26.5 ≈ $22,642 in required taxable withdrawals that year.

• With the QLAC: your RMD is calculated on the remaining $450,000 — $450,000 ÷ 26.5 ≈ $16,981.

That’s roughly $5,660 less in taxable RMD income in just the first year alone, and the reduction continues every year the QLAC remains in deferral — compounding over what could be a decade or more before payments begin. The actual dollar impact on your taxes depends on your marginal bracket, and if the reduction keeps you below an IRMAA threshold or Social Security taxation threshold, the real-world savings can extend beyond the income tax bracket itself.

Who Tends to Benefit Most

Two practical reasons tend to drive QLAC purchases: reducing current RMDs (by lowering the account balance the IRS uses to calculate your required withdrawal) and guaranteeing income later in life, specifically covering the years when you’re most likely to have outlived other savings.

The RMD-reduction benefit tends to matter most for people who fit one or more of these patterns:

• Larger qualified account balances, since bigger accounts produce bigger RMDs and a bigger tax impact from reducing them.

• Sitting near a tax bracket boundary, where even a modest RMD reduction could keep you in a lower bracket.

• Approaching an IRMAA threshold, since Medicare Part B and Part D premium surcharges are triggered by income levels — a lower RMD can help you stay under that line.

• Already have other income covering current needs (Social Security, a pension, non-qualified savings), meaning you don’t actually need the full RMD amount to live on right now.

If none of these apply — for instance, you’re already in a low tax bracket, or you need all of your RMD income to cover current expenses — the tax benefit of a QLAC is much smaller, and the tradeoff of tying up funds until a later age may not be worth it.

A more advanced pairing worth knowing about: some retirees use the lower taxable income a QLAC creates during the deferral years as an opportunity to execute Roth conversions at a lower marginal rate than they’d otherwise face — effectively using the RMD reduction to create planning room for shifting traditional IRA assets into a Roth account more tax-efficiently. This is a more sophisticated strategy that depends heavily on your specific tax situation and is worth modeling with a tax professional rather than assuming it applies broadly.

When the Math Argues Against a QLAC

It’s worth giving real weight to the case against buying one, not just the case for it. Financial planning researcher Michael Kitces has examined QLACs used purely as an RMD-reduction tactic, and his analysis is a useful gut check:

• A QLAC buyer typically has to survive to roughly age 88 just to recover the original premium in nominal payments.

• Compared to simply leaving the money invested and taking normal RMDs, a diversified portfolio growing at even a conservative rate tends to outperform the QLAC payout stream well past age 100.

• Because QLAC payments are backloaded to start at 80–85, the eventual payout can actually accelerate how quickly the rest of your IRA depletes once RMDs resume on the smaller remaining balance — arguably the opposite of what many buyers assume they’re getting.

The filter this suggests: a QLAC tends to be a reasonable choice if you’re using it as a bond-like substitute for guaranteed income, genuinely hedging longevity risk, or deliberately planning to spend down every asset you own. It tends to be a poor choice if the only goal is making your RMD number smaller — the tax savings alone usually don’t justify giving up 15+ years of liquidity and market exposure on that money. Running the numbers both ways — with and without the QLAC — through an actual retirement projection is worth doing before committing, rather than treating the RMD reduction as the entire case for buying one.

Before assuming a QLAC is the right RMD-management tool, it’s worth ruling out simpler alternatives first: voluntary IRA withdrawals in lower-bracket years, Roth conversions, or — if you’re charitably inclined and 70½ or older — Qualified Charitable Distributions (QCDs), which can satisfy your RMD without increasing your adjusted gross income the way a normal distribution does. None of these require locking up money for over a decade the way a QLAC does. And if your qualified savings sit inside a workplace plan rather than an IRA, know that implementation can be less straightforward — plan rules, available annuity options, and rollover logistics all affect what’s actually possible, so confirm with your plan administrator before assuming a QLAC purchase is even available to you.

What To Do Next

A QLAC is a genuinely useful tool for a specific purpose: reducing near-term RMDs while guaranteeing income for later in life, funded specifically from qualified retirement savings. Whether it fits your situation depends on your account balances, your other income sources, and how you value guaranteed income versus liquidity. If you want to review whether a QLAC makes sense as part of your retirement plan, reach out and we’ll work through the numbers together.

Questions? Call (800) 927-9326 or email

Sources: IRS Instructions for Form 1098-Q (Rev. 04/2025), IRS.gov; IRS Notice 2025-67 (2026 QLAC contribution limit); 26 CFR § 1.401(a)(9)-6(q) (Qualifying Longevity Annuity Contract regulation); IRS Publication 590-B (Uniform Lifetime Table); SECURE 2.0 Act of 2022, Section 202; Julia Kagan, “Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example,” Investopedia, updated July 2026; Financial Planning Association, “Creating Guaranteed Income with QLACs,” July 2025; Nichole Myers (Chief Underwriter) and Laura Heeger (Chief Compliance & Privacy Officer), “Qualified Longevity Annuity Contract (QLAC): Pros and Cons Explained,” Ethos, updated July 2026; Stan Haithcock, “What Is a Longevity Annuity?” AAII Journal, November 2014 (payout structure mechanics only); Mike Thrift, “QLACs in 2026,” Beancount.io, citing analysis from financial planning researcher Michael Kitces, July 2026; Greenleaf Trust, “Qualified Longevity Annuity Contracts (QLACs)” client guidance, October 2024; Bullseye Retirement, “QLACs in 2026: Can a Deferred Income Annuity Lower Future RMD Pressure?” August 2026; David McGuffey, “QLACS Update,” Elder Law Practice of David L. McGuffey, LLC, August 2024, summarizing final Treasury regulations published in the Federal Register (79 FR 37633).