What Is a Qualified Longevity Annuity Contract (QLAC)?

A qualified longevity annuity contract, or QLAC, is a type of annuity contract that you can use to create an additional stream of income in retirement. This type of annuity can offer guaranteed monthly payments beginning at a specific date and ending when you pass away. Like other annuities, it’s important to weigh the pros and cons before deciding whether it makes sense to include one in your financial plans.

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What Is a Qualified Longevity Annuity Contract?

A QLAC is a type of deferred annuity contract. With an immediate annuity, payments can begin right away, or relatively soon after you purchase it. A deferred annuity, on the other hand, doesn’t begin making payments to you until a later date.

While it’s possible to fund other types of annuities using savings or by paying regular premiums from your income, QLACs are different. This kind of annuity is funded using pre-tax dollars from an individual retirement account (IRA) or 401(k). You can’t use after-tax dollars from a Roth IRA or money from an inherited IRA to purchase a QLAC.

How Does a QLAC Work?

When you buy an annuity, you’re purchasing a contract from an insurance or annuity company. That contract specifies that you’ll pay in premiums. Then, at some point, the insurance company begins making payments back to you. These payments may arrive in monthly installments or as a lump sum, depending on how the annuity is structured.

You take money from your 401(k) or IRA to purchase a QULAC. You’ll agree with the annuity contract issuer on a specific date when payments will begin. Until then, the money will grow tax-deferred.

Up until age 85, a QLAC allows you to temporarily sidestep required minimum distributions (RMDs). These mandatory withdrawals, associated with traditional IRAs, 401(k)s and other qualified, tax-deferred retirement plans, begin when you turn 73. Failing to take your RMD on time could result in a steep tax penalty of up to 25% of the amount you were required to withdraw.

Advantages of Using a QLAC for Retirement Planning

Perhaps the most obvious benefit of a QLAC is that it allows you to temporarily defer taking RMDs without incurring a tax penalty. Specifically, you can defer taking payments from this type of annuity up until age 85. If you’ve funneled some of the money from your traditional IRA or 401(k) into a qualified longevity annuity contract, you can delay taking RMDs and subsequently having to pay the income taxes owed on them.

This can be a good thing if you anticipate a longer life expectancy and want to avoid the possibility of running out of money in retirement. A QLAC would deliver guaranteed income for the remainder of your life. So, even if you deplete other retirement savings or assets, you’d still have a steady stream of income from your annuity contract.

QLACs can also offer principal protection and insulation against market volatility. That can be reassuring if you’re concerned about how a recession or inflation might affect your purchasing power.

If you’re married, you also have the option to set up your QLAC as a joint annuity. This allows your spouse to continue receiving payments if you pass away, or vice versa.

Who Should Purchase a QLAC?

A QLAC is most beneficial for retirees who want guaranteed income later in life and are concerned about outliving their savings. Because QLAC payouts begin at an older age, often between 75 and 85, they can serve as a financial safety net during the years when other retirement assets may be running low. This makes them appealing to individuals who value stability, prefer predictable income and want to reduce the risk of relying solely on market-based investments in their later years.

QLACs can also make sense for those looking to manage RMDs from traditional retirement accounts. Since money used to purchase a QLAC is excluded from RMD calculations (up to IRS limits), it can help lower taxable income in earlier retirement years.

However, QLACs aren’t ideal for everyone. Investors who need liquidity, want growth potential or prefer more flexible access to their savings may find other retirement income strategies more suitable.

If you’re unsure whether a QLAC aligns with your long-term goals, a financial advisor can help you weigh the benefits and trade-offs based on your specific situation.

What to Know Before Purchasing a QLAC

If you’re interested in using a longevity annuity to fund your retirement goals, there are a few things to keep in mind.

First, you should know that that QLACs aren’t a free-for-all when it comes to delaying RMDs. The IRS imposes limits on how much you can invest in one. In 2026, that limit is $210,000, with no percentage-of-savings limit. This limit has the potential to increase annually with inflation.

Next, consider the level of risk and growth you’re likely to see from your money. While your principal is protected with this type of annuity, the amount of growth you can realize is fixed. Investing your money elsewhere may involve taking on more risk. However, it could yield better returns.

You should also be aware of what type of investments you can make with this kind of annuity. You can’t invest QLAC money in a variable annuity or indexed annuity. Instead, you have to choose a fixed annuity that offers a predictable rate of return.

And again, remember that this type of annuity only delays the need to take RMDs; it doesn’t eliminate it entirely. Even if you push back RMDs until age 85, you’ll still have to take them and pay the associated taxes eventually. And with the tax landscape ever-changing, there’s no guarantee of how much you might be able to save in taxes, especially if your tax bracket changes.

What Happens If You Die Before QLAC Payments Begin

A QLAC is, at its core, a bet that you’ll live long enough to collect. Since payments typically don’t start until somewhere between age 75 and 85, it’s worth understanding what happens to the money if the owner passes away during that deferral period.

By default, a basic QLAC with no additional provisions doesn’t guarantee any return of the premium paid in. If the owner dies before payments begin and there’s no death benefit or joint annuity structure in place, the insurance company generally keeps the money, and no benefit passes to heirs. This is a meaningful risk to weigh against the “guaranteed income” and “principal protection” advantages discussed earlier. In reality, those benefits only materialize if the owner survives to collect.

Fortunately, most QLACs offer ways to address this. A return-of-premium death benefit ensures that if the owner dies before recovering the full amount paid into the contract, a named beneficiary receives the remaining balance. This feature typically comes at a cost, though, generally reducing the size of the eventual monthly payments.

The joint annuity option mentioned earlier serves a related but distinct purpose. Rather than returning the unused premium as a lump sum, it continues income payments to a surviving spouse for their lifetime.

Note that you’ll generally need to make these elections at the time of purchase. As such, this an upfront decision worth thinking through carefully. You can’t revisit these add-ons once the contract is already in place.

Bottom Line

Longevity annuity contracts, one of several types of annuities, can help you secure reliable income for retirement. However, they may not be right for everyone. If you don’t own a traditional IRA or 401(k), you may not be able to purchase one at all. For those with eligible retirement accounts, considering factors like your life expectancy, investment objectives and financial needs can help you decide if a QLAC is a good fit.

Tips for Investing

Consider talking with a financial advisor about QLACs and other retirement planning strategies. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area. From there, you can have a free introductory call with your advisor matches to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
When comparing any type of annuity product, it’s important to consider the costs as well as the quality and reputation of the company offering it. Investigate an annuity company’s ratings, and look for one that’s in good financial shape. If your annuity company were to go bankrupt, it might not have the money to make your annuity payments when the time comes.