What is a QLAC and how does it differ from a regular annuity?

A Qualified Longevity Annuity Contract is a specific type of deferred income annuity purchased inside an IRA or 401(k) that receives special IRS treatment — the balance is excluded from the account value used to calculate RMDs. A regular annuity inside an IRA does not get this treatment. To qualify, the contract must be purchased from an insurance company, meet IRS specifications in Treasury Regulation § 1.401(a)(9)-6, and the first payment must begin by age 85. QLACs cannot have cash surrender value and cannot be variable or indexed annuities.

How much does a QLAC reduce my RMD?

Your RMD is calculated as your prior year-end account balance divided by the IRS distribution period for your age. A QLAC reduces your RMD base by exactly the premium you contribute. For example, a $200,000 QLAC in a $1,000,000 IRA reduces the RMD base to $800,000 — cutting your RMD by 20% indefinitely until QLAC payments begin. At age 73 with a 26.5 distribution period, this saves roughly $7,500 in RMD income per year.

Is a QLAC contribution a taxable event?

No. Moving money from a traditional IRA into a QLAC within the same IRA is not a taxable distribution. The money remains in a pre-tax account. You pay taxes when the QLAC begins making income payments, just as you would with any traditional IRA withdrawal. The QLAC itself does not change the tax character of the money — it simply delays when the income hits your tax return.

What happens to the QLAC if I die before payments begin?

Most QLAC contracts offer a death benefit option — typically a return of premium paid to a named beneficiary if you die before payments start. Some contracts offer joint-life options that continue payments to a surviving spouse. If no death benefit is elected, the premium is forfeited to the insurance company. The death benefit option reduces the monthly income amount, so this is a tradeoff to discuss with an insurance agent or financial planner.

Can I use a QLAC in a 401(k) not just an IRA?

Yes. QLACs can be purchased inside eligible 401(k), 403(b), and 457(b) plans if the plan sponsor allows it. Not all plans have adopted QLAC provisions. If your employer plan does not offer a QLAC option, you can roll over the amount to a traditional IRA and purchase a QLAC there. The $200,000 limit applies across all accounts combined.

How does a QLAC interact with IRMAA Medicare surcharges?

IRMAA is calculated on your MAGI — which includes all IRA distributions, including RMDs. By reducing your RMDs by $7,500–$10,000 per year, a QLAC can keep your income below an IRMAA threshold, saving an additional $74–$298 per month in Medicare Part B premiums. This Medicare savings can represent a significant portion of the QLAC's total financial benefit.

What are the risks of a QLAC?

The main risks are insurer default risk, inflation risk, and the longevity bet. QLACs are not FDIC insured — they depend on the financial strength of the insurance company (look for carriers rated A+ by AM Best or equivalent). Because payments are fixed, inflation erodes purchasing power over a 10–20 year payout period. And if you die before payout starts without a death benefit rider, the premium is lost. QLACs are most appropriate for people who expect to live well into their 80s or 90s and want to ensure they cannot outlive a portion of their savings.

When should I buy a QLAC — at retirement or closer to age 85?

Generally earlier is better, because the RMD reduction benefit runs from purchase through the payout start age. Buying at 65 instead of 72 gives you 7+ more years of reduced RMDs. However, the QLAC premium could have grown inside the IRA during those 7 years, so the timing tradeoff depends on your assumed growth rate vs. the QLAC's guaranteed payout rate. A common approach is to purchase between ages 70–75 — capturing meaningful RMD reduction without giving up too many growth years.

Retirement & Investing

QLAC RMD Deferral Calculator (2026)

See how a Qualified Longevity Annuity Contract reduces your Required Minimum Distributions and what monthly income it provides starting at age 75, 80, or 85.

By The FinCalc TeamUpdated May 28, 2026

If you have a large traditional IRA or 401(k), Required Minimum Distributions starting at age 73 force income you may not need — pushing you into higher tax brackets, increasing Medicare IRMAA surcharges, and making more of your Social Security taxable. A Qualified Longevity Annuity Contract (QLAC) lets you move up to $200,000 out of your RMD calculation entirely, deferring that income until age 75, 80, or 85 — when you may actually need guaranteed lifetime income. This calculator shows how a QLAC reduces your annual RMDs and what monthly income it provides when payments begin.

How QLACs and RMD Deferral Work

The RMD Problem

Required Minimum Distributions are calculated by dividing your prior year-end IRA balance by an IRS distribution period based on your age. The larger your balance, the larger your RMD — regardless of whether you actually need the income.

For people with $500,000–$2M+ in traditional IRAs, RMDs at 73 can generate $20,000–$80,000+ in taxable income they did not budget for. This extra income:

Pushes up the marginal tax bracket on all other income
Increases the percentage of Social Security benefits that are taxable
Triggers or increases IRMAA Medicare surcharges
Potentially reduces eligibility for ACA subsidies if pre-Medicare

The QLAC solution: move up to $200,000 outside the RMD calculation base entirely.

How the Exclusion Works

When you purchase a QLAC, the IRS treats the premium as excluded from the "account balance" used to compute RMDs. If your IRA is worth $1,000,000 and you put $200,000 into a QLAC, your RMD base is $800,000. At age 73 (distribution period 26.5):

| Scenario | RMD base | RMD amount | |----------|----------|------------| | Without QLAC | $1,000,000 | $37,736 | | With $200K QLAC | $800,000 | $30,189 | | Annual reduction | | $7,547 |

That $7,547/year reduction is not just deferred — it stays inside the QLAC growing until your chosen start age, then converts to guaranteed lifetime income.

QLAC Payout Rates

The monthly income from a QLAC depends on your age at purchase, chosen payout start date, contract type, and prevailing interest rates. Delaying payout substantially increases the monthly amount:

| Payout Start Age | Approx. annual payout per $100K premium | |-----------------|----------------------------------------| | 75 | ~$7,200/year ($600/mo) | | 80 | ~$9,600/year ($800/mo) | | 85 | ~$14,000/year ($1,167/mo) |

These are market averages — get quotes from multiple A-rated insurers.

When a QLAC Makes Sense

When your projected RMDs will push you into a higher tax bracket. If you expect $500,000+ in traditional retirement accounts at 73, your RMDs alone may exceed your spending needs and generate unwanted taxable income. The QLAC is most powerful when that $7,500–$10,000/year RMD reduction keeps you under a tax bracket cliff.

When you are near an IRMAA threshold. If your MAGI sits close to $109,000 (single) or $218,000 (MFJ) — the first IRMAA tier — reducing RMDs by even a few thousand dollars can eliminate a $74+/month Medicare surcharge, worth $888+/year.

When you want longevity insurance without spending from your portfolio. A $200,000 QLAC starting at 85 delivers roughly $14,000/year for life — guaranteed income you cannot outlive, funded from money you would have had to distribute anyway.

When you are in your 60s or early 70s and still accumulating. The RMD reduction runs from purchase through payout start — the earlier you buy, the more years of RMD reduction you receive.

Related Calculators

IRMAA Appeal Impact Calculator (SSA-44) — model how QLAC-driven RMD reduction affects your IRMAA tier
Inherited IRA 10-Year RMD Optimizer (2026) — if you inherited a traditional IRA, QLACs do not apply to inherited IRAs, but the RMD planning framework is directly relevant
Super Catch-Up Window Calculator (2026) — maximizing pre-tax contributions before retirement reduces the balance that drives future RMDs

Understanding the Inputs

Total IRA / 401(k) Balance: The total combined balance of all your traditional IRAs and 401(k)/403(b) accounts as of December 31 of the prior year — the figure used to calculate your current year RMDs. Do not include Roth IRAs (they have no RMDs during your lifetime), Health Savings Accounts, or non-retirement brokerage accounts. If you have multiple IRAs, add them together; RMDs are calculated on the aggregate balance.
QLAC Premium: The dollar amount you will contribute to the QLAC. SECURE 2.0 (effective 2023) raised the QLAC limit to $200,000 — a flat dollar cap, replacing the old 25%-of-balance rule. Contributions to a QLAC reduce your RMD base by exactly that amount. Most people fund the maximum $200,000 to get the largest RMD reduction, but you can contribute any amount up to the limit. Unlike a Roth conversion, a QLAC contribution is not a taxable event — you are simply repositioning money within your pre-tax accounts.
Your Current Age: Your age as of today. You must be under your chosen QLAC payout start age to purchase a QLAC. RMDs begin at age 73 under SECURE 2.0. The calculator shows your first-year RMD based on the IRS Uniform Lifetime Table distribution period for your current age.
QLAC Payout Start Age: The age at which your QLAC annuity begins making guaranteed lifetime income payments. IRS rules allow payout start ages from the policy purchase date through age 85. Delaying payout maximizes the RMD reduction window and substantially increases the monthly income amount — a $200,000 QLAC starting at 85 pays roughly twice the monthly income of one starting at 75, because the insurer collects more interest and the payout period is shorter.
Portfolio Growth Rate: The expected average annual return on your remaining non-QLAC IRA balance. This is used only for the 15-year projection table to show how your IRA balance and RMDs evolve over time. It does not affect the QLAC payout estimate. A conservative assumption (4–6%) is appropriate for a balanced portfolio in the distribution phase.

Frequently Asked Questions

Related Calculators

IRMAA Appeal Impact Calculator (SSA-44)

Retirement & Investing

Inherited IRA 10-Year RMD Optimizer (2026)

Retirement & Investing

Super Catch-Up Retirement Window Calculator (2026)

Retirement & Investing

The FinCalc Team

Personal Finance Experts

The FinCalc team is a group of personal finance writers, analysts, and engineers dedicated to building accurate, transparent financial calculators. Every formula is verified against industry standards and explained in plain language.

Last reviewed and updated: May 28, 2026