What Is a QLAC? Deferring RMDs With Longevity Income

What is a QLAC in plain English?

Spelled out, QLAC stands for qualified longevity annuity contract. Strip away the acronym and it is simply a deferred income annuity, one of the four families in our types of annuities guide, that federal tax rules allow you to hold inside a traditional IRA or a workplace plan such as a 401(k) or 403(b), where the plan offers it. You move a slice of retirement money into the contract now, and the insurer promises a monthly paycheck that begins at an age you choose, as late as 85, and continues for the rest of your life.

The product exists to solve one specific fear: running short of money in your late eighties and nineties, after your other savings have already done decades of work. It is insurance against a very long life, not a way to grow money. If you are still getting oriented on how these contracts work at all, start with our pillar guide, what is an annuity, and come back.

Any lifetime income guarantee is backed by the claims-paying ability of the issuing insurer; it is not FDIC-insured or bank-guaranteed.

How does a QLAC defer required minimum distributions?

Once you reach RMD age, currently 73 for most retirees and scheduled under current law to rise to 75 for younger savers, the IRS requires you to withdraw a minimum amount from pre-tax retirement accounts every year and pay ordinary income tax on what comes out. The math behind each year's RMD is straightforward: your account balance at the end of the prior year, divided by a life expectancy factor from the IRS tables.

A QLAC changes the first number in that equation. Money you move into a QLAC is excluded from the account balance used to calculate your RMD until the contract's income actually begins. A smaller counted balance means a smaller required withdrawal, which means less forced taxable income during the deferral years. The rest of your IRA keeps following the normal schedule; only the QLAC slice steps out of the calculation.

Two honest cautions belong right here. First, this is deferral, not forgiveness. Payments must begin no later than the first day of the month after you turn 85, and once they start, every dollar is fully taxable as ordinary income. Second, an RMD is not a penalty in itself; it is simply a withdrawal you may have wanted anyway. A QLAC only helps when the required withdrawals are genuinely larger than what you need to live on.

What are the QLAC rules for 2026?

Congress simplified the rules with the SECURE 2.0 Act. The purchase limit is $210,000 for 2026, counted per person across all QLACs you own, and indexed over time. The old rule that capped purchases at 25% of your account balance is gone. The contract must be a fixed deferred income annuity; variable and index-linked contracts do not qualify, though a cost-of-living adjustment is permitted. You can add a return of premium death benefit or cover a spouse with a joint life option, and federal rules allow a rescission window of up to 90 days if you change your mind right after buying.

Rules summarized from IRS guidance in effect for 2026; contract terms and plan documents control. Guarantees are backed by the claims-paying ability of the issuing insurer and are not FDIC-insured.

How is QLAC income taxed?

Plainly, because a QLAC is funded with money that was never taxed. Growth inside the contract is tax-deferred, never tax-free. When payments begin, every dollar arrives as ordinary income, the same way an RMD would have. There is no return-of-principal exclusion here, because none of the premium was after-tax money to begin with.

The honest way to think about the tax benefit: a QLAC lets you choose when a slice of your retirement money becomes taxable, and it can shrink your forced withdrawals during years when you do not need the income. Whether that timing shift actually helps depends on your bracket now, your bracket later, and how the income stacks with Social Security and Medicare premium thresholds. Our guide to the retirement tax picture walks through those moving parts. Consult a licensed tax advisor about your own numbers before committing anything.

Who does a QLAC suit, and who should walk away?

A QLAC is a narrow tool that does one job well: it converts a capped slice of retirement money into a paycheck for the last stretch of a long life, and it quiets the RMD math while you wait. That job matters to some retirees and simply does not exist for others.

One more distinction worth naming. If the gap in your plan is income now, not income at 85, a QLAC is the wrong instrument; an immediate annuity or another income design may fit better, and our guide to guaranteed lifetime income shows how those paychecks are built. For a broader self-check, read is an annuity right for me, and for the full honest list of people who should skip these products entirely, see our post on who should not buy an annuity.

Any guaranteed income floor from an annuity is backed by the claims-paying ability of the issuing insurer; it is not FDIC-insured or bank-guaranteed.

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