Qualified Longevity Annuity Contract (QLAC)

A qualified longevity annuity contract (QLAC) is a type of annuity that allows you to defer taxes on your investment earnings until you start taking withdrawals. This can be a valuable option for retirees who want to delay paying taxes on their retirement savings.

There are a few key things to know about QLACs. First, they must be purchased from an insurance company that is licensed to sell QLACs. Second, the maximum amount you can invest in a QLAC is $135,000 per year. Third, you must start taking withdrawals from your QLAC no later than age 85.

There are some advantages to investing in a QLAC. One advantage is that you can defer taxes on your investment earnings until you start taking withdrawals. This can be a significant savings, especially if you are in a high tax bracket. Another advantage is that QLACs offer guaranteed lifetime income. This can provide peace of mind knowing that you will have a steady stream of income for the rest of your life.

However, there are also some disadvantages to investing in a QLAC. One disadvantage is that you may not be able to access your money as easily as you would with other types of retirement savings vehicles. For example, you may have to pay surrender charges if you withdraw money from your QLAC before age 59 1/2. Another disadvantage is that QLACs typically have lower interest rates than other types of annuities.

Overall, QLACs can be a good option for retirees who want to defer taxes on their retirement savings and who are looking for a guaranteed lifetime income. However, it is important to weigh the pros and cons of QLACs before making a decision.