When to use a QLAC?


Editorial team Published on

A Qualified Longevity Annuity Contract (QLAC) makes sense if you want to lower your required minimum distributions (RMDs) in your 70s and guarantee yourself a steady stream of income later in life (up to age 85).

Learn more about these mechanics directly through Fidelity's QLAC Overview.

When a QLAC Makes Sense

  • You want to lower early retirement taxes: Buying a QLAC removes that money from your traditional IRA or 401(k) balance used to calculate RMDs. This keeps your taxable income lower during your 70s.
  • You are worried about outliving your money: If you fear running out of funds in your late 80s or 90s (longevity risk), a QLAC locks in lifetime income that starts later.
  • You have extra savings to lock up: You must have enough separate liquid cash or investments to live on comfortably while the QLAC funds sit untouched and deferred.
  • You want to fund late-life care: Deferring income until age 80 or 85 can line up with potential high medical or long-term care costs.

When a QLAC Does Not Make Sense

  • You might need the cash: Once you buy a QLAC, that money is locked away with limited liquidity. It cannot be easily accessed for emergencies.
  • You have a short life expectancy: If you do not expect to live into your 80s, the financial return may not be worth it unless you purchase a cash-refund or beneficiary rider (which lowers your payout).
  • You want inflation protection: Standard QLAC payments are fixed and lose purchasing power over time unless you specifically pay extra for an inflation-adjusted rider.