Qualified longevity annuity contracts (QLACs) use deferred income annuities. The IRS has granted a particularly favorable status to QLACs for the purpose of deferring required minimum distributions.
The QLAC rules of engagement permit a qualified plan participant to use 25% of their qualified plan, not to exceed $125,000 ($250,000 for married couples) and defer distributions until age 85. The vast majority of qualified plans and retirement models will need to be reconfigured to accommodate the impact of adding QLACs to their overall planning strategies. The potential ramifications of deferring QLAC monies could have a profound effect, the result of which could be the reduction of taxes. Syndicated financial columnist and talk show host Steve Savant interviews nationally recognized annuity expert Mike McGlothlin, ChFC, CLU, CFP. This end of the year update highlights some of the industry’s leading annuity product innovations and planning concepts into a five part series.

Syndicated financial columnist and talk show host Steve Savant interviews nationally recognized annuity expert Mike McGlothlin, ChFC, CLU, CFP. This end of the year update highlights some of the industry’s leading annuity product innovations and planning concepts into a five part series. …(read more)

LEARN MORE ABOUT: Qualified Retirement Plans

REVEALED: How To Invest During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

How qualified longevity annuity contracts will affect retirement plans – Let’s Get Down to Business

retirement planning is a crucial consideration for individuals looking to secure their financial future. With an ever-increasing life expectancy, one common concern is the possibility of outliving one’s retirement savings. To address this issue, the concept of qualified longevity annuity contracts (QLACs) has emerged as a potential game-changer, offering a reliable solution to help individuals fund their retirement adequately.

So, what exactly are qualified longevity annuity contracts, and how do they affect retirement plans? To understand this, let’s delve into the details.

QLACs are a specific type of annuity that provides a guaranteed stream of income to individuals during their retirement years. What sets QLACs apart from other annuity options is their deferred nature. Traditional annuities typically involve immediate payment upon the purchase of the contract, whereas QLACs postpone payouts until a later date, usually when the annuitant reaches a specific age, such as 80 or 85.

By deferring payouts, QLACs allow individuals to ensure a more reliable income stream during their later years, reducing the risk of running out of money in retirement. This feature makes them particularly appealing to those concerned about longevity risk, which involves the possibility of living longer than expected and exhausting their retirement savings.

Furthermore, QLACs provide certain tax advantages that can significantly enhance retirement plans. The U.S. Internal Revenue Service (IRS) allows individuals to invest up to a certain limit, currently set at 25% of their total retirement account balance or $135,000 (whichever is smaller), in a QLAC without including this amount in their required minimum distribution (RMD) calculation. RMD is the minimum amount individuals must withdraw from retirement accounts once they reach a certain age, usually 72, to avoid tax penalties. By excluding QLAC funds from the RMD calculation, individuals can potentially reduce their taxable income and, consequently, their tax burden on distributions from other retirement accounts.

Another valuable aspect of QLACs is their ability to provide protection against market volatility. Unlike many other retirement savings vehicles, QLACs offer a form of insurance against investment losses. With a QLAC, the annuitant is assured of receiving a specified income regardless of how the financial markets perform. This stability can help individuals weather economic uncertainties during their retirement years and provide peace of mind.

Nevertheless, it is important to carefully consider the implications of QLACs before incorporating them into retirement plans. QLACs inherently limit an individual’s access to their funds until the deferred payout date. Therefore, those who anticipate needing immediate access to their retirement savings may find QLACs less suitable. Additionally, individuals should assess their overall retirement portfolio and goals, as QLACs may not be suitable for everyone’s financial situation.

In conclusion, qualified longevity annuity contracts offer an innovative solution to tackle the challenges of retirement planning in an era of increasing life expectancy. With their deferred payout feature, tax advantages, and protection against market volatility, QLACs present an attractive option for individuals seeking to secure their financial future. However, it is essential to carefully evaluate individual circumstances and consult with financial advisors to determine if QLACs align with personal retirement goals. By doing so, individuals can optimize their retirement plans and enjoy a worry-free, financially stable future.