The Qualified Longevity Annuity Contract (QLAC) must be purchased using qualified pre-tax retirement savings. The result of a July 2014 amendment to the Tax Code, the QLAC was designed to provide relief from required minimum distributions (RMDs) applicable to these pre-tax accounts starting at age 70½. It is thus only available in accounts subject to the RMD rules.
A QLAC can be purchased with funds from the following pre-tax savings accounts:
- All IRA accounts except Roth
- 401(k) plans
- 403(b) plans
- 457(b) plans
A QLAC cannot be purchased with funds from any non-qualified post-tax accounts or:
- Roth IRA accounts
- Defined Benefit plans
While QLACs are specifically designed to convert pre-tax retirement savings into lifetime income, other options exist for post-tax savings. Single Premium Immediate Annuities (SPIAs) and Deferred Income Annuities (DIAs) can both be purchased with any type of pre- or post-tax savings.
Head to the QLAC Guide to learn more about the product, how it works, and whether it makes sense for your retirement.