Qualified Longevity Annuity Contract (QLAC)

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What is a 'Qualified Longevity Annuity Contract (QLAC)'

A qualified longevity annuity contract (QLAC) is a deferred annuity funded with an investment from a qualified retirement plan or IRA. The annuity contract is a guarantee of monthly payments until death. It is shielded from the downturns of the stock market. As long as the annuity complies with IRS requirements, it is exempt from the required minimum distribution (RMD) rules until payouts begin after the specified annuity starting date.

BREAKING DOWN 'Qualified Longevity Annuity Contract (QLAC)'

One of the biggest fears many people have as they grow older is outliving their money. Qualified Longevity Annuity Contracts, or QLACs, are a creation of the IRS to address this issue. The QLAC is an investment vehicle that guarantees that funds in a qualified retirement plan, such as a 401(k), 403(b) or IRA, can be turned into lifetime income without violating required minimum distribution rules for those turning age 70½.

However, the promised benefit of QLACs can only be achieved if rules set by the IRS are followed. The annual distribution is based on the value of the account at the end of the preceding year. For more information, see A Guide to Qualified Longevity Annuity Contracts.