SPIA vs QLAC: Income Now vs Income Later

A SPIA turns a lump sum into a paycheck that starts almost immediately, usually within about a month. A QLAC is a deferred income annuity bought inside a traditional IRA or workplace plan that can wait until as late as age 85 to start, and its premium comes out of your required-minimum-distribution math. Same engine, different start date.

Think about mailing a letter to yourself. A SPIA is a letter you hand to the carrier this morning and read this afternoon. A QLAC is a letter you postmark for delivery in twenty years, addressed to the version of you who is 85 and still going, still paying for groceries, and no longer earning.

Both letters are written in the same ink. Both are promises from an insurance company to pay you money for as long as you live, backed by that company’s claims-paying ability rather than by FDIC insurance. The difference is when the envelope opens, and that single difference changes the size of the check, the tax treatment, and the kind of worry each one is built to solve.

Most people meet these two products at different moments and never realize they are cousins. Here is the family resemblance, and the places where they genuinely part ways.

What is a SPIA, in plain English?

A SPIA is a single premium immediate annuity: you hand an insurer a lump sum and it starts sending you a fixed payment, usually beginning within about a month, for a period you choose or for the rest of your life.

The trade you are making is liquidity for certainty. You give up access to the money. In exchange, the insurer takes on the risk that you live to 103.

What is a QLAC, and what makes it “qualifying”?

A QLAC is a Qualifying Longevity Annuity Contract: a deferred income annuity bought with money already sitting in a traditional IRA or workplace retirement plan, structured to meet specific IRS conditions so that its premium is excluded from the balance used to calculate your required minimum distributions.

That exclusion is the whole point. Required minimum distributions begin at age 73 if you were born between 1951 and 1959, and at 75 if you were born in 1960 or later, under the SECURE 2.0 Act. Money you move into a QLAC stops counting toward that calculation, so your RMD shrinks while the QLAC waits.

The $210,000 figure is a lifetime cap per person across every retirement account you own, not a per-contract or per-year allowance, and it is indexed for inflation. The QLAC page carries the current limit and refreshes it when the IRS updates it.

SPIA vs QLAC: how do they compare side by side?

The clearest way to see the split is a direct comparison. Both are income annuities. Almost everything else about how they behave comes down to when they start and what money bought them.

Two honest notes on that table. First, a SPIA is not “worse” because it has no RMD trick. It is answering a different question. Second, the QLAC’s tax advantage only exists because you are agreeing to wait, and waiting is not free. You are lending the insurer your money for two decades in exchange for a larger check later and a smaller tax bill now.

How much income does each one actually buy?

Payment size rises sharply with age, because the insurer expects to make fewer payments. Below are current illustrative figures from AnnuaLife’s surveyed income grid, showing the best available monthly income in that survey on a $100,000 single-life immediate annuity for a man at each age.

Those figures are dated September 2, 2026, are illustrations rather than quotes, and change without notice. Quotes for women run lower at the same age because average life expectancy is longer. The date-stamped income payout page refreshes these regularly. Any contract you actually buy is backed by the claims-paying ability of the issuing insurance company, is not FDIC insured, and is not backed by a bank or the government, so the carrier’s independent financial strength rating belongs next to the payment figure.

A QLAC extends that same age curve further out. Deferring income from 70 to 85 means the insurer expects to pay you for far fewer years and gets to hold your money for fifteen of them, which is why a QLAC purchased in your sixties can produce a materially larger annual check at 85 than the same premium would buy as an immediate annuity today. Carriers quote these individually, so treat the age curve above as the shape of the math, not a substitute for a real quote.

What are the QLAC rules you cannot bend?

The IRS conditions are strict, and a contract that misses one of them simply is not a QLAC. Here is the short list of what has to be true.

• It must be funded with traditional retirement money. Traditional IRAs and most workplace plans qualify. Roth IRAs and inherited IRAs do not.
• Total premiums cannot exceed $210,000 per person in 2026, per IRS Notice 2025-67, counted across every QLAC you own. SECURE 2.0 repealed the older cap of 25 percent of your account balance in December 2022.
• Income must begin no later than the first day of the month after your 85th birthday. You may choose an earlier start date at purchase.
• The contract must be fixed. Treasury regulations under section 401(a)(9) exclude variable and indexed contracts from QLAC treatment.
• It must be designated a QLAC when issued. This is not a label you can apply later to a contract you already own.
• There is no cash surrender value. Many contracts allow a rescission window of up to 90 days after purchase. After that, the money is committed.

Death benefits are permitted. A return-of-premium feature can send your remaining premium to your beneficiaries if you die before or during the payout period, and a surviving spouse can generally continue the contract’s income. Every one of those features costs something in payment size.

When does a SPIA fit better?

A SPIA fits when the gap is now. If your Social Security and any pension do not cover your essential monthly bills today, a SPIA is the most direct tool for closing that gap, because it converts a pile of money into a bill-paying paycheck immediately.

• You are retired or about to be, and the shortfall is in this year’s budget.
• You want the largest possible income per dollar starting immediately, without a rider’s moving parts.
• The money is nonqualified, in a Roth, or otherwise outside QLAC eligibility.
• You want to cover a specific recurring cost, such as property taxes or a Medicare premium, with a payment you can plan around.
• You are worried about spending down erratically and want the decision made once.

If you are not sure how large your shortfall really is, our guide to the retirement income gap walks through the arithmetic before you commit a dollar.

When does a QLAC fit better?

A QLAC fits when your near-term income is already handled and the worry is the far end of the map. It solves two problems at once for a specific saver: the fear of outliving money in your late eighties and nineties, and an RMD that is larger than your actual spending.

What are the honest downsides of both?

Both products ask you to give up control of a lump sum permanently, and neither is reversible when your circumstances change.

• Illiquidity is the price of both. After the free-look or rescission window, you generally cannot get the lump sum back. A medical bill at 78 will not persuade the insurer to reopen the contract.
• Inflation eats a level payment. A fixed $679 a month buys less in 2046 than it does in 2026. Inflation-adjusted payout options exist and start meaningfully lower.
• The QLAC’s payoff depends on living to collect. If you die at 82 with an income start date of 85 and no return-of-premium feature, your heirs receive nothing from that contract.
• Both are backed by the issuer, not by FDIC insurance. The promise is only as good as the insurer’s claims-paying ability, which is why carrier financial strength ratings matter more here than on almost any other purchase.
• Neither one grows. These contracts buy certainty, not upside. This is not the place for money you want to grow aggressively.

Can you use both, and how would that look?

Yes, and blending them is often more sensible than choosing a winner, because they cover different decades. The usual structure is a floor now and a backstop later.

Moving forward

Neither of these contracts is a plan by itself. A SPIA is one paycheck in a budget with several income sources, and a QLAC is one envelope postmarked for a decade you cannot see from here. The right question is never “SPIA or QLAC.” It is “which years of my retirement are unprotected, and which tool covers those years at the lowest cost in flexibility.”

Answer that, and the product choice usually answers itself. If you want to understand the timing decision more broadly before you shop, our comparison of immediate versus deferred annuities covers the same fork in the road across every product type.

When you want a real quote instead of an illustration, our short Find My Advisor questionnaire matches you with a verified Certified Annuity Advisor licensed in your state who can price both structures against your actual numbers. No pressure, no obligation. This article is general education and not tax advice; confirm any tax treatment with your own tax professional before you sign anything.

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