Looking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.
A little more than 10 years ago, the U.S. government did something right for retirees. It created the QLAC as a way to provide longevity protection on a tax-favored basis using savings in an IRA or other qualified account. Here’s how the bill was framed:
“All Americans deserve security in their later years and need effective tools to make the most of their hard-earned savings,” the IRS said of the rationale for QLAC. “As boomers approach retirement and life expectancies increase, longevity income annuities (our emphasis) can be an important option to help Americans plan for retirement and ensure they have a regular stream of income for as long as they live.”
As part of new legislation passed in December 2022, the SECURE 2.0 Act addressed many areas of retirement, including increasing the amount that can be invested in a QLAC to $200,000. As important, the law also eliminated a requirement that limited QLAC premiums to 25% of an individual’s retirement account balance. Finally, in January 2025 the limit was further increased to $210,000, up from the original $125,000. Taken together, that means a single investor with $400,000 of IRA assets could more than double their QLAC allocation from $100,000 to $210,000.
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