Qualified longevity annuity contracts (QLACs)

A qualified longevity annuity contract (QLAC) is a deferred income annuity bought with money from a traditional IRA or workplace plan, with payments that must begin by age 85. The money you put into it is not counted when your required minimum distributions are calculated, so it lowers taxable withdrawals in your 70s and 80s and buys a guaranteed income stream for very old age. For 2026 the most you can pay into QLACs is $210,000.

The 2026 limit

The cap is a lifetime dollar limit on total premiums across all your QLACs, not an annual one. IRS Notice 2025-67 states that the limitation on premiums for a qualifying longevity annuity contract under Treas. Reg. section 1.401(a)(9)-6(q)(2)(ii) "remains $210,000" for 2026, the same figure as 2025. Under SECURE 2.0 the limit is indexed to inflation in $10,000 steps, so it can sit unchanged for a year or more, and the older rule capping a QLAC at 25% of your account balance was repealed. Premiums that exceed the cap are not QLAC premiums and stay in your RMD calculation.

How a QLAC works

1. You buy the contract from an insurer with money from a traditional IRA, or from a 401(k), 403(b) or governmental 457(b) plan if the plan allows it. Roth IRAs are not eligible because they have no lifetime RMDs.
2. You choose a start date for income, no later than age 85. A later date means a larger payment per dollar, because the insurer holds your money longer and pays fewer years on average.
3. Until payments begin, the premium is excluded from the account balance used to figure RMDs. Say a hypothetical 72-year-old has $800,000 in an IRA and puts $200,000 into a QLAC. Her RMDs would be computed on the remaining $600,000 plus anything else she holds, not the full $800,000.
4. At the start date you receive taxable income, usually for life. Payments are ordinary income because the money was never taxed going in.

The contract itself is a deferred income annuity. It has no cash value you can withdraw, no account balance and no investment choices once it is bought. The annuity payout calculator gives a feel for how age, start date and payout form change the payment.

Rules the contract must follow

• No cash surrender. A QLAC cannot offer a commutation or lump-sum withdrawal, which is why its price is favorable compared with an annuity you can cash out.
• Fixed amounts. Payments cannot be variable or indexed to markets. Many contracts offer a fixed annual increase.
• Death benefit. A refund of unreturned premium is allowed to a beneficiary if you die before or after payments start, and the contract must say it is a QLAC. Payments to a surviving spouse can continue, including a joint-and-survivor form.
• Disclosure. The insurer must provide the QLAC status and report it to the IRS.

Because the QLAC is a promise from one insurer, its safety rests on that company's financial strength and on state guaranty association limits. Check those with the state guaranty association coverage lookup; per NOLHGA (as of June 1, 2025), annuity protection is typically $250,000 in most states and higher in a few.

The case for a QLAC

• It protects against living very long. Payments that start at 85 are guaranteed no matter how long you live, so the rest of your savings only has to last to 85.
• It lowers RMDs and the tax bills that follow, in the years when RMDs begin (age 73 for people born 1951 to 1959, 75 for those born in 1960 or later, per the IRS).
• Mortality pooling is efficient at advanced ages: people who die before 85 effectively fund payments to those who live past it.

The case against

• If you die early you may get nothing back unless you chose a return-of-premium feature, which lowers the payment.
• The money is locked up and may be uncompetitive if rates rise after you buy. See how annuity rates are set and why they move.
• Inflation can erode a fixed payment that starts a decade or more after purchase.
• The tax saving is a deferral. Income that starts at 85 is still taxed at then-current rates.
• Many retirees do not need the RMD reduction. The tax effect on a modest IRA may be small.

Who it tends to suit

A QLAC fits a healthy retiree with a meaningful traditional IRA balance, family longevity, and enough other assets to cover the years until the start date. It suits poorly someone who needs access to the money, has a shorter life expectancy, or has only a small IRA. A fee-only planner or tax professional can model your own numbers. See Should you put an annuity in an IRA? for the broader question of annuities in retirement accounts and are annuities a good idea? for the wider debate.

Key takeaways

• A QLAC is a deferred income annuity funded from a traditional IRA or plan, with payments starting no later than 85.
• The 2026 premium limit is $210,000 per person across all QLACs, unchanged from 2025, per IRS Notice 2025-67.
• The premium is excluded from RMD calculations until payments begin, but the income is taxable when received.
• There is no cash value to withdraw, so early death can mean a loss unless you add return of premium.
• It suits healthy retirees worried about very long life, not people who may need the money back.