A QLAC — a qualified longevity annuity contract — is a deferred income annuity you buy inside a qualified retirement account such as a traditional IRA, 401(k), 403(b), or governmental 457(b). You hand a portion of that account to an insurance company today, and the company guarantees a monthly income starting on a date you pick years in the future, as late as age 85.
What separates a QLAC from any other deferred annuity is a specific IRS exemption. As long as the contract meets the Treasury rules, the premium you put into it is excluded from the account balance used to calculate your required minimum distributions during the deferral period. No other annuity inside an IRA gets that treatment.
How a QLAC lowers your RMDs
RMDs are calculated from your December 31 account balance each year. Move money into a QLAC and that premium comes off the balance for RMD purposes until QLAC income begins. Less countable balance means a smaller required distribution and a smaller taxable amount in the years the deferral is running.
SECURE 2.0 set the maximum QLAC premium at $210,000 for 2026, across all of your qualified accounts combined, and indexed it to inflation. The law also eliminated the previous 25%-of-balance cap, so the dollar figure is now the only limit that applies.
The practical effect: on a $900,000 IRA, funding a $210,000 QLAC leaves $690,000 in the RMD calculation. At a first-year RMD divisor of roughly 26.5, that is about $8,000 less in forced distributions in year one, and the gap compounds as the divisor shrinks. This is a deferral, not an erasure — the income is fully taxable as ordinary income when it starts, exactly the way the rest of a pre-tax IRA is. Our guide to how annuities are taxed walks through the RMD mechanics and the qualified versus non-qualified distinction in more detail.
The purchase itself is not a taxable event. Funding a QLAC is a transfer inside the plan, which follows the same rules as any other 401(k) or IRA conversion into an annuity.
How the income timing works
You choose a start date when you buy. It can be any month up to the first day of the month after your 85th birthday — that is the outside limit the rules allow. The longer the deferral, the larger the eventual payment, because the insurer expects a shorter payout period and has more years of credited interest behind it.
Payout choices are deliberately narrow. A QLAC can pay single life or joint and survivor life income, and that is essentially it. No period-certain-only option, no lump-sum commutation, no cash surrender value. Some contracts permit a return-of-premium death benefit and limited start-date flexibility, but the core structure is a lifetime payment stream. If the tradeoffs among lifetime payout structures are new to you, our piece on annuitization and payout options covers how each one changes the check size.
Once income starts, the QLAC satisfies its own RMD obligation. The payments are the distribution for that portion of your savings; you do not calculate a separate RMD on top of them.
Who a QLAC actually fits
It fits a retiree who is genuinely worried about outliving savings. A QLAC is longevity insurance in the literal sense: it costs comparatively little because most of the value sits far in the future, and it pays most in exactly the scenario that wrecks a drawdown plan, which is living to 92.
It fits when RMDs are pushing you into a higher tax bracket, or close to an IRMAA threshold that raises your Medicare Part B and Part D premiums. Shaving several thousand dollars a year off countable income can keep you under a bracket edge, and the IRMAA surcharge is a cliff rather than a phase-in — a dollar over the threshold raises the premium for the full year.
And it fits when you simply do not need that money in your sixties and seventies. If Social Security plus a pension already covers your fixed expenses, deferring a slice of the IRA to age 80 or 85 costs you nothing in current lifestyle.
It does not fit if you need liquidity. Money in a QLAC is gone as a balance — there is no withdrawal, no loan, no emergency access. It also fits poorly if inflation protection matters to you and you do not want to pay for it: a level QLAC payment starting 20 years out buys materially less then than the same dollars do today, and adding a cost-of-living rider reduces the initial payment noticeably. Anyone whose health suggests a shorter-than-average life expectancy, or who has heirs as the top priority, will usually do better elsewhere.
What a QLAC gives up
Illiquidity until income starts. Between purchase and the start date, that money is untouchable. No partial withdrawals, no surrender for cash.
No cash value. Your statement will not show an account balance growing. There is nothing to look at and nothing to reallocate.
No inflation adjustment by default. Payments are level unless you buy an increasing-payment feature, and that feature lowers the starting amount.
Rate risk on timing. The payout is locked at the rates in force the day you buy. Buying the full $210,000 in one contract on one date concentrates that risk; splitting the premium across two purchase dates or two carriers spreads it, and also spreads carrier exposure across state guaranty association limits.
None of these are hidden. They are the structural cost of buying the highest guaranteed income per dollar available inside a retirement account. The question is whether that trade matches what the rest of your plan already covers.
FAQ
What's the maximum I can put into a QLAC in 2026?
The 2026 limit is $210,000 in total premium across all of your IRAs and eligible employer plans combined, indexed for inflation by the IRS. SECURE 2.0 removed the older rule that also capped the premium at 25% of your account balance, so the dollar limit is the only ceiling. A married couple can each fund up to the limit from their own accounts.
Can I lose access to that money forever?
You lose access to it as a balance. A QLAC has no cash surrender value, so you cannot withdraw it, borrow against it, or cash it in once the contract is issued. What you own instead is a contractual right to income payments starting on the date you selected. That illiquidity is the price of the higher payout and the RMD deferral.
What happens to a QLAC if I die before payments start?
It depends on the death benefit you elect at purchase. A return-of-premium death benefit refunds your premium to your beneficiary, and most QLACs offer it, though electing it lowers your future monthly income. A joint-life QLAC continues payments to your surviving spouse. Without either feature, a life-only contract can pay nothing if you die during the deferral period, which is why most buyers add one.
Is a QLAC the same as a regular deferred annuity?
No. A QLAC is a narrow subtype of deferred income annuity that meets IRS rules, so its premium is excluded from RMD calculations. An ordinary deferred annuity inside an IRA gets no such exemption and its full value still counts toward your RMD. A QLAC also cannot offer cash value or period-certain payouts, which many other deferred contracts can. See our comparison of immediate vs deferred annuities for the broader category.
A QLAC is a narrow tool that does one job well. Before committing the maximum premium, run the RMD numbers and the IRMAA thresholds against your actual account balances so you know what the deferral is worth in your situation.