In 2014, the IRS approved the purchase of a QLAC in IRA accounts. With a QLAC you can delay taking required minimum distributions (“RMDs”) for up to 15 years, to as late as age 85. By delaying RMDs, your retirement savings accounts can gain a significant tax advantage. 

What exactly is a QLAC?

A QLAC is a new breed of longevity annuity (also known as deferred income annuity). You buy a QLAC with qualified or pre-tax money. In other words, a QLAC is a type of deferred income annuity that you buy with IRA or 401k money and delays making any payments to you until later in life. This is a very important government change that realize we are living longer and anytime the government gets it right, we should explore it more. This will have the same or similar effect as the introduction of Roth IRAs on the retirement community. 

As I mentioned earlier, RMD is the acronym for Required Minimum Distributions. RMD is the amount of money Uncle Sam requires you to withdraw each year from your IRA and 401k accounts once you reach age 70-1/2. The IRS makes you take this money out of your IRA and 401k accounts so it can tax that money. These required withdrawals are included in your taxable income. In July, 2014, the Treasury Department relaxed the RMD rules a bit, reflecting the government’s desire to encourage you to prepare financially for your retirement. The new rules allow you to buy a longevity annuity with your IRA money and not worry about having to include the value of that IRA annuity in your RMD calculations from age 70-1/2 up to age 85.

New QLAC rules change the game.

Under the new rules, as long as your longevity annuity meets certain conditions, it becomes a “qualifying” longevity annuity or QLAC and is determined to meet the RMD rules even though you've reached age 70-1/2 and are not taking any income payments from your annuity until much later in life. The new regulations mean that premiums paid into a QLAC are not included in RMD calculations. 

Of course all details and specifications will need to be explored beyond this article. For anyone reading this and would like more information on how this new IRS rule could effect your Retirement, feel free to email me at info@carsongraves.com or visit http://carsonenterprise.retirerx.com/ and request Free information about this topic or any other Retirement related issues.