Whole Life Income

QLACs: Using a Deferred Annuity to Cut RMDs and Delay Taxes

A QLAC lets you move a slice of IRA money out of required minimum distributions until as late as age 85 — useful for tax control, not for everyone.

6 min read · Updated June 30, 2026

Key takeaways

  • QLAC premium is excluded from the IRA balance used to compute RMDs.
  • Income must begin no later than the first day of the month after turning 85.
  • The SECURE 2.0 dollar limit is indexed annually; confirm the current figure before funding.
  • Best fit: retirees with large IRAs, other income sources, and longevity in the family.

What a QLAC does

A qualified longevity annuity contract is a deferred income annuity purchased inside an IRA or qualified plan. Premium paid into a QLAC comes out of the account balance used to calculate required minimum distributions, so your RMDs — and the ordinary income tax on them — shrink for as long as the QLAC is deferred.

The rules that matter

  • Income must start by the first day of the month after your 85th birthday.
  • Premium is capped at an indexed dollar limit set by SECURE 2.0, with no percentage-of-balance limit.
  • Only fixed income annuities qualify — no variable or indexed contracts, no cash value.
  • A return-of-premium death benefit is permitted and is the usual choice for married buyers.

The math, simply

Moving $200,000 out of a $1.2 million IRA at 72 reduces the RMD base by one sixth. At a roughly 3.8% first-year distribution factor, that is about $7,600 less taxable income in year one and more each year after, which can also keep Medicare IRMAA brackets and Social Security taxation in check. In exchange, you have committed that $200,000 to a payout starting at a future date.

Who should skip it

  • Anyone who may need that money before the income start date — QLACs have no liquidity.
  • Retirees in poor health or with short family longevity.
  • People whose RMDs are already small relative to spending needs.
  • Anyone planning large Roth conversions, which may be the better tax lever first.

Frequently asked questions

What is the QLAC limit?
SECURE 2.0 removed the 25%-of-balance cap and set a flat dollar limit that is indexed for inflation each year. Verify the current year's figure with the carrier or IRS before funding, since it changes.
Can I buy a QLAC in a Roth IRA?
No. QLAC treatment applies to traditional IRAs and qualified plans. Roth IRAs have no lifetime RMDs, so there is nothing to defer.
What happens to a QLAC if I die before payments start?
With a return-of-premium option, your beneficiary receives the premium back. Without it, nothing is paid — which is why most buyers elect the option despite the lower income.

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