Dear Liz: I read in a recent column that you mentioned qualified longevity annuity contracts (QLAC). I have heard about them before but don’t know the pros and cons about them. Is that something that you could write about in a future column?
Answer: QLACs are complicated enough to be beyond the scope of this column, but you can read an excellent summary by Morningstar’s Christine Benz at https://www.morningstar.
QLACs are deferred, fixed-income annuities that pay out guaranteed income once you’ve reached a certain age (up to age 85). You can buy them with IRA money, up to a certain lifetime limit ($210,000 per individual in 2026). The amount you put into the annuity is excluded from required minimum distribution calculations until payouts begin.
Guaranteed income and reduced RMDs are definite “pros,” but buying one of these annuities is typically an irrevocable decision — you can’t get your money back if you need it for something else. Fixed-income annuities are also vulnerable to inflation, and it’s important to find a strong insurer, since you’re essentially buying a promise of future payments. Ideally, you’d hire a fiduciary, fee-only advisor to review the contract and your situation to make sure it’s a good fit before you buy.
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