Retirement Income

What Is a QLAC? The Annuity the IRS Built Into the Tax Code

ALBy The AnnuaLife Team10 min read · Updated September 15, 2026

A QLAC is a qualified longevity annuity contract: a deferred income annuity bought inside an IRA or workplace plan with money the IRS then excludes from your required minimum distribution calculation. For 2026 the lifetime premium limit is 210,000 dollars per person (IRS Notice 2025-67), and income must begin by age 85.

Most retirement products are invented by insurance companies and then squeezed into the tax code. The QLAC went the other direction. Treasury wrote the rules first, in 2014, and carriers built products to fit them. SECURE 2.0 rewrote those rules again at the end of 2022, raising the dollar limit and removing the old percentage cap.

Think of a QLAC as a time capsule for one slice of your retirement account. You bury a defined amount, the IRS agrees not to count it in your required withdrawals while it is buried, and it opens as a monthly income stream on a date you pick, no later than 85.

That is a narrow product with a narrow purpose, which is exactly why almost nobody has heard of it. This guide covers what it is, what it is not, and who it actually helps. The full mechanics live on the QLAC guide. Nothing here is tax advice.

What does QLAC stand for, and what makes it different?

QLAC stands for qualified longevity annuity contract. It is a deferred income annuity with a specific tax status, and four terms carry the whole idea.

Qualified

Bought with money already inside a tax-deferred retirement account: a traditional IRA, SEP or SIMPLE IRA, 401(k), 403(b), or governmental 457(b). Roth IRAs are not eligible, and they have no lifetime RMD requirement anyway.

Longevity

The payments are designed to start late, which is what makes them large. You are insuring against living a long time, not against a bad market.

Annuity contract

A promise from an insurer, backed by its claims-paying ability rather than FDIC insurance, which is why carrier strength carries more weight here than in almost any other purchase. See the AM Best rating explainer.

RMD exclusion

The feature that makes a QLAC a QLAC. The premium is removed from the account balance used to calculate your required minimum distributions until QLAC payments begin.

Everything else about a QLAC behaves like an ordinary deferred income annuity. Strip out the tax rule and you are simply buying future income at a discount for waiting.

How does a QLAC lower your required minimum distributions?

RMDs are calculated from your prior-year-end account balance divided by an IRS life expectancy factor. A QLAC lowers the numerator. Money moved into the contract is no longer part of the balance the formula uses, so the required withdrawal shrinks for as long as the QLAC has not started paying.

A worked illustration (hypothetical numbers, not a projection or a quote). A 73-year-old has 800,000 dollars in a traditional IRA on December 31. Under the IRS Uniform Lifetime Table, the distribution period at 73 is 26.5, so the required withdrawal is roughly 30,189 dollars. If 210,000 dollars of that IRA had gone into a QLAC, the balance driving the calculation would be 590,000 dollars, and the required withdrawal would be roughly 22,264 dollars. The difference is about 7,925 dollars of income that does not have to come out that year. Whether that helps depends entirely on your bracket and the rest of your return, so treat this as arithmetic rather than advice. Our RMD calculator runs your own numbers.

Two things that illustration does not show. First, this is deferral, not forgiveness: when QLAC payments begin, they are taxable as ordinary income. Second, RMD age depends on your birth year under SECURE 2.0, which set it at 73 for people born from 1951 through 1959 and 75 for those born in 1960 or later. Our annuity RMD rules guide and the 2026 RMD table cover both.

01Confirm your RMD age and current required amount

If your RMDs are comfortable, a QLAC is solving a problem you do not have.

02Decide how much future income you want, and at what age

Working backward from a target payment is easier than starting from a premium.

03Check the 210,000 dollar lifetime limit against what you have already used

The limit is per person across all your qualified accounts, not per account.

04Shop quotes from multiple carriers for the same start age

Deferred income pricing varies widely between companies.

05Buy inside the account, not outside it

The premium moves directly from the IRA or plan to the contract, so the transaction itself is not a taxable distribution.

What are the QLAC rules for 2026?

The rules are unusually specific, which is what happens when a product is written by regulation instead of by marketing.

Rule	2026 detail
Lifetime premium limit	210,000 dollars per person, across all qualified accounts (IRS Notice 2025-67)
Eligible funding sources	Traditional IRA, SEP and SIMPLE IRA, 401(k), 403(b), governmental 457(b)
Not eligible	Roth IRAs, and any account already in required-beginning-date distribution as an inherited account
Latest income start date	The first day of the month after your 85th birthday
Percentage-of-balance cap	Removed by the SECURE 2.0 Act of 2022; only the dollar limit applies now
Investment type allowed	Fixed income annuity only. Variable and indexed contracts do not qualify under the Treasury regulations
Cancellation window	SECURE 2.0 permits a rescission period of up to 90 days after purchase, if the contract provides it
Death benefit	Optional return-of-premium and survivor features are permitted and reduce the eventual payment

The prior 25 percent of account balance cap is the rule people most often still repeat. SECURE 2.0, signed in December 2022, eliminated it and set the limit at a single indexed dollar figure, which is why a saver with a 400,000 dollar IRA can now use the full 210,000 dollars where the old rule would have allowed 100,000 dollars.

A QLAC is not a tax shelter. It is a scheduling tool. You are moving income, not erasing it.

The AnnuaLife Team

Who is a QLAC a good fit for?

A QLAC fits a specific person: someone whose required withdrawals exceed what they need, who expects to live a long time, and who is comfortable committing money for a decade or more.

Retirees with RMDs larger than their spending. If you are pulling money out only because the IRS says so, moving a slice into a QLAC delays the requirement and converts it into income you will actually need later.
People with real longevity in the family. The product pays most when you live long. That is not a hope, it is the pricing model.
Savers who want a late-life income floor. A payment starting at 80 or 85 covers the years when portfolio management gets hardest and long-term care costs often arrive. See longevity risk in retirement planning.
People who want to reduce sequence pressure on the rest of the portfolio. Knowing a guaranteed check starts at 85 changes how much the remaining balance has to cover.
Couples who want survivor income. A joint QLAC can continue payments to a surviving spouse, at a lower payment amount.

Who should skip a QLAC?

The disqualifiers are just as specific, and they rule out most people who ask about the product.

You need the money before payments start. A QLAC is illiquid by design for a decade or more. There is no partial withdrawal, no surrender value in most contracts, and no changing your mind after the rescission window.
Your RMD is not a problem. If you spend your required withdrawals, deferring them accomplishes nothing except locking up money.
You have a health condition that shortens life expectancy. Buying an income stream that starts at 85 is a poor use of capital if reaching 85 is unlikely, even with a return-of-premium feature.
Your qualified balance is modest. A 210,000 dollar premium against a 300,000 dollar IRA commits far too much of the account to one illiquid contract.
You want the money to pass to heirs intact. Even with a death benefit rider, a QLAC is built to pay you. Other tools transfer wealth more efficiently.
Inflation is your main worry and you buy a level payment. A check set today and starting in 15 years buys considerably less then. Inflation-adjusting versions exist and start lower.

What should you compare between QLAC quotes?

The comparison is short, because the tax rules are identical across carriers. What differs is price and structure.

The payment per dollar of premium

Same premium, same start age, same options. Quotes vary meaningfully between carriers, and this is the number that matters most.

Carrier financial strength

You are relying on this company for a promise that may not begin for 15 years and may then run for 20 more. The AM Best rating deserves more weight here than in a 5-year contract.

The income start age

Later means larger. Model 80 and 85 side by side rather than defaulting to the latest allowed date.

Single versus joint life

A joint contract continues for a surviving spouse and pays less. For married buyers this is usually the first decision, not the last.

Death benefit structure

Return of premium protects your heirs if you die before payments start, and it reduces the income. Get the quote both ways before deciding what that protection is worth.

Whether the contract offers the rescission window

SECURE 2.0 permits up to 90 days, but the contract has to provide it. Ask.

How is a QLAC different from a SPIA?

A SPIA starts paying almost immediately and can be bought with any money. A QLAC starts paying years later, must be bought inside a qualified account, is capped at 210,000 dollars for 2026, and carries the RMD exclusion that a SPIA does not.

Buy a SPIA when

You need income now, from money of any kind, and you want the largest immediate check per dollar.

Buy a QLAC when

Your RMDs exceed your needs, you want income starting late, and the money is already inside a traditional IRA or plan.

Compare them directly

The two products share pricing DNA and differ almost entirely on timing and tax treatment.

Moving forward

The time capsule only makes sense if you can afford to leave it buried. That is the whole test. A QLAC is not a better annuity than the alternatives, it is a narrower one, aimed at a tax rule that only bothers a certain kind of saver.

If your required withdrawals are pushing income you do not need into a bracket you do not want, the arithmetic is worth running. Start with your actual numbers on the RMD calculator, read the detailed QLAC rules, and check the tax mechanics on the annuity taxes guide. Then confirm the fit with a professional before committing anything, since the decision cannot be reversed after the rescission window closes. A Certified Annuity Advisor can price start ages and survivor options side by side, and your tax professional should weigh in on the bracket question before you fund it.

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Frequently asked questions

What is a QLAC?

A QLAC, or qualified longevity annuity contract, is a deferred income annuity purchased inside a traditional IRA or workplace retirement plan. The premium is excluded from the account balance used to calculate required minimum distributions until payments begin, and income must start no later than the first day of the month after you turn 85.

What is the QLAC limit for 2026?

The lifetime QLAC premium limit for 2026 is 210,000 dollars per person, per IRS Notice 2025-67. It applies across all of your qualified accounts combined rather than per account, and it is indexed for inflation, so it can change in future years.

How does a QLAC reduce RMDs?

Required minimum distributions are calculated by dividing your prior-year-end account balance by an IRS life expectancy factor. Premium moved into a QLAC is removed from that balance until QLAC payments begin, so the required withdrawal is smaller. The tax is deferred rather than avoided, because QLAC payments are taxable as ordinary income when they start.

Can you buy a QLAC in a Roth IRA?

No. QLACs must be funded from traditional IRAs, SEP or SIMPLE IRAs, 401(k)s, 403(b)s, or governmental 457(b) plans. Roth IRAs are excluded, and because Roth IRAs have no lifetime required minimum distributions for the original owner, the RMD benefit would not apply anyway.

When do QLAC payments have to start?

No later than the first day of the month following your 85th birthday. You can choose an earlier start date, and earlier means a smaller monthly payment because the insurer expects to pay for more years. Most buyers model at least two start ages before deciding.

Can you cancel a QLAC?

Only within a rescission window, which the SECURE 2.0 Act permits for up to 90 days after purchase if the contract provides it. After that, a QLAC is generally irrevocable and has no cash surrender value, which is why the liquidity question has to be settled before you buy rather than after.

What happens to a QLAC if you die before payments start?

It depends on the options you selected. With a return-of-premium death benefit, your beneficiary receives the premium back. Without one, a basic contract may pay nothing, which is precisely why the death benefit choice is part of the quote rather than an afterthought. A joint contract continues payments to a surviving spouse.

Is a QLAC worth it?

It is worth considering if your required withdrawals exceed your spending, you expect a long life, and you can commit money for a decade or more without needing it. It is not worth it if you spend your RMDs, your qualified balance is modest, or liquidity matters to you. This is general education rather than tax advice, so run the bracket math with a tax professional first.