QLAC payments must start by the owner/annuitant’s 85th birthday. In order for the product to be considered a QLAC, payments must start later than age 70½. The longer you wait for income payments to start, the more powerful the QLAC’s tax-deferral.
The lower and upper bounds for income payments to start are stipulated by the IRS regulation that governs Qualified Longevity Annuity Contracts (QLACs). First, let’s cover the lower bound, or the requirement that income payments start by age 70½. The QLAC was created to reduce the withdrawal requirements applied to all pre-tax retirement savings. These required minimum distributions, which must begin at age 70½, force some people to draw down their savings faster than they’d like. The QLAC created a way to defer those RMDs beyond age 70½, and thus income in the contract must start after age 70½ for it to be used as intended.
For the upper bound, the government chose the retirement account owner’s 85th birthday as the latest income payments could begin. You may elect for payments to start earlier than age 85, but earlier income start ages reduce the QLAC’s tax-deferral benefits.
If you’d like to start income before age 70½, you can either purchase a Single Premium Immediate Annuity (if you’d like the income to start within 12 months) or a qualified Deferred Income Annuity (if you’d like the income start in 2 years or more but before age 70½).
Learn more about QLACs, how they work, and whether they make sense for your retirement in the QLAC Guide.