Are you concerned about outliving your retirement income? Don’t be!

By Ken Arvidson, CLU, MSFS

June 18, 2015

IRS guidelines now allow you to place 25% of your IRA Assets (up to $125,000) into a Qualified Longevity Annuity Contract (QLAC). This type of Deferred Income Annuity will delay a monthly benefit for you in the future, as late as age 85. When you decide to receive a monthly benefit, that amount will be guaranteed for you or your spouse’s life.

In addition, using a QLAC will reduce your Required Minimum Distribution (RMD) on your IRA. An RMD calculated on $125,000 for a 75 year old is $5,459.00. In a 30% tax bracket your tax savings is approximately $1600.00.

You can ensure the QLAC contribution will be received by your beneficiary, should you die before the monthly payments begin. In addition, your beneficiary can receive a cash refund payout if you don’t receive the full amount of your contribution to the QLAC. You will name the beneficiary who will receive the remainder of the proceeds. In either event, whatever amount was deposited into the QLAC, the full amount will be paid out.

For example: a 70 year old transfers $125,000 from his IRA to a QLAC with distributions starting at age 85. A monthly benefit for life is calculated to be $2,358. Should he die after the monthly payments have begun, a cash refund will be paid for the balance to the beneficiary. Or if he dies prior to the start date, the return of premium option will pay the original $125,000 to the beneficiary.

Consider repositioning IRA assets into a QLAC if you have sufficient income for retirement and want to:

  • Delay receiving distributions
  • Reduce the tax you must pay on Required Minimum Distributions in your IRA
  • Provide guaranteed income as long as you are alive

This is a wonderful strategy for you to consider. Contact Peter or Ken to answer questions about Qualified Longevity Annuity Contracts.

Email Ken if you have QLAC questions.

This article was featured in 4SIGHT. Sign up free to receive 4SIGHT, our monthly newsletter of helpful financial articles, tips, events, and monthly IRS deadlines. 



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