One of the biggest fears in retirement is outliving your money. As life expectancies stretch into the 80s and 90s, a 65-year-old retiree might need to fund 25 or 30 years of living expenses. A Qualified Longevity Annuity Contract — or QLAC — is a specific type of annuity designed to address exactly this risk.
What Is a QLAC?
A QLAC is a type of deferred income annuity that you purchase with money from your IRA or 401(k). In exchange for a lump-sum premium paid today, an insurance company promises to pay you a guaranteed monthly income starting at a future date you select — anywhere from the time of purchase to age 85.
Under current rules (updated by SECURE 2.0):
- You can use up to $200,000 from your qualified retirement accounts to purchase a QLAC
- The money used is excluded from your Required Minimum Distribution (RMD) calculations
- Payments must begin no later than age 85
How QLACs Work
Suppose you are 70 years old with a $1 million IRA. You use $200,000 to purchase a QLAC. That $200,000 is immediately excluded from your RMD calculation — your RMD is now based on $800,000 instead of the full $1 million, which meaningfully reduces your annual RMD and the associated tax bill.
In exchange, the insurance company agrees to pay you a guaranteed monthly income starting at age 80. Depending on the insurer, your age at purchase, and the income start date you choose, a $200,000 premium for a 70-year-old might purchase about $2,000 to $3,500 per month starting at 80 — for life, no matter how long you live.
Most QLACs include a return-of-premium death benefit if you die before payments begin. Some offer joint-and-survivor options so your spouse can continue receiving income after your death.
The Two Core Benefits of a QLAC
1. Longevity protection. A QLAC is insurance against living too long. If you make it to 90 or 95, your QLAC continues paying throughout. You cannot outlive the income stream.
2. RMD reduction. By removing up to $200,000 from your RMD calculation, you reduce mandatory taxable withdrawals, potentially keep yourself in lower tax brackets, and may reduce Medicare IRMAA surcharges that kick in at higher income levels.
Who Should Consider a QLAC?
A QLAC makes the most sense for people who:
- Have a large IRA and do not need all of their RMDs for living expenses
- Are concerned about outliving their savings
- Want to reduce their taxable income in early retirement
- Are in good health with a family history of longevity
- Have Social Security and other income to cover their early retirement years
The Tradeoffs and Risks
Illiquidity. The money you use to purchase a QLAC is gone from your accessible pool. This is a significant commitment.
Mortality risk. If you die shortly after income payments begin, you or your heirs receive far less than you paid in. The return-of-premium rider helps mitigate this at the cost of a lower monthly payment.
Inflation risk. Most QLACs pay a fixed monthly amount. If inflation is significant, the purchasing power of those fixed payments will be reduced over time.
Insurer risk. You are making a long-term promise with an insurance company. Stick with financially strong, highly rated insurers and consider splitting the premium across two companies if you are using the full $200,000 limit.
How to Evaluate QLAC Quotes
The key metric is the monthly income the contract promises per dollar of premium. Compare quotes from multiple insurers. Also check:
- Whether the contract includes a return-of-premium death benefit
- Whether joint-and-survivor options are available for your spouse
- The financial strength ratings of the insurer (look for A- or better from AM Best)
- The cost of adding inflation protection
Bottom Line
A QLAC is a specialized tool for retirees worried about longevity risk and high RMD tax bills. By using up to $200,000 of retirement funds to purchase guaranteed income starting in your late 70s or early 80s, you reduce your current tax burden and create a floor of income for the later years of life — when financial complexity is harder to manage and the stakes of running out of money are highest.
For more on this topic, see our guide on how variable annuities differ from QLACs for retirement income planning.
Related: SECURE Act 2.0: Complete Guide to Retirement Account Changes in 2026