A. Yes, you could. There is a new type of deferred income annuity - a Qualified Longevity Annuity Contract (QLAC), it offers a tax benefit for retirees who have a lot of money in tax-deferred retirement accounts.
With QLAC, you can invest up to 25% of your traditional IRA or 401(k) plan (or $125,000, whichever is less) in a QLAC without raking required minimum distribution on that money when you turn age 70.5. To qualify for this special tax treatment, your payment must begin no later than age 85.
How does QLAC reduce tax bill?
New York life did a study - assume a 70-year old in the 28% tax bracket with $500,000 in an IRA would pay $117,000 in taxes on RMDs between age 70 and 85, assuming 5% annual net return. If the retiree put 25% of the IRA balance into a QLAC at age 70, he would pay roughly $87,000 in taxes over the same period. Taxes will increase once the annuity payment starts at age 85.