A. QLAC stands for qualified longevity annuity contract. QLACs attracted people's attention from 2014 when the government okayed the use of them for IRAs and 401(k) plans. It's predicted to be the next biggest thing for investors who plan retirements.
An investor can move 25% of the qualified retirement savings accounts, up to a maximum of $125,000 to a QLAC. Instead of receiving immediate payouts, the investor can defer the payouts as well as the required minimum distributions (RMD) on the amount in the annuity until age 85, this means tax savings and a guaranteed revenue stream.
Just like a regular annuity product, the longer the investor waits to take the money out, the more the payout grows – and the growth is free of risk and guaranteed.
Long Term Care Insurance Alternative
A QLAC is a good alternative for people who cannot afford or get long-term care insurance. With their guaranteed income stream, longevity annuities can also help take the pressure off a portfolio and protect retirees against bad sequences of market returns.
What QLAC Is Not For?
Longevity annuities are not likely to be a good choice for people who cannot afford to take deferred payments or who are in failing health.