QLACs-Qualified Longevity Annuity Contracts
In this episode of Ask The Hammer, Jeffrey Levine of Buckingham discusses the pros and cons of qualified longevity annuity contracts (QLACs).
Key Takeaways
- You can invest up to $200,000 in a QLAC and exclude it from RMD calculations, but this should not be your primary reason for purchasing—the main purpose is managing longevity risk
- QLACs provide guaranteed fixed income for life (with possible COLA adjustments) and can be structured to cover a spouse, eliminating the risk of outliving your assets
- Mortality credits in QLACs allow insurance companies to pool risk across many people, enabling higher payments to those who live longer by having shorter-lived individuals' funds subsidize longer-lived ones
- Once you purchase a QLAC, you cannot exit the contract—treat it as an illiquid, bond-like investment that should complement (not replace) equities in your portfolio
- If your only goal is reducing RMDs, consider alternatives like taking withdrawals, making Roth conversions, or simply accepting the RMD before locking money into an irreversible annuity
QLACs-Qualified Longevity Annuity Contracts: In this episode of Ask The Hammer, Jeffrey Levine of Buckingham discusses the pros and cons of qualified longevity annuity contracts (QLACs). QLACs are a type of annuity that can be used to reduce required minimum distributions (RMDs) and provide guaranteed income in retirement. Levine notes that the biggest benefit of QLACs is that they can help you outlive your money. Additionally, the income payments from a QLAC are guaranteed, which can provide peace of mind in retirement. However, Levine also cautions that QLACs are illiquid and cannot be sold back to the insurance company. Additionally, the returns on QLACs are typically lower than other investments, such as stocks or bonds. Watch more episodes of Ask The Hammer at this link: https://www.finstream.tv/videos/ask-the-hammer/
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