Does Your Traditional IRA Need a QLAC?

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Hi, this is Stan The Annuity Man. Welcome to my webinar. We have renamed webinars as STAMinars. S.T.A.M. / Stan The Annuity Man, so STAMinar. This STAMinar is about Qualified Longevity Annuity Contracts, QLACs as they’re called. They’ve been around just for a couple years since 2014. Not a lot of people know about them, yet. My prediction is this annuity type, out of all kinds of different annuity types, will be the number one selling annuity type in the country in five years. I’m the only one saying that, but of course I’m right. So let’s move on and get into Qualified Longevity Annuity Contracts.

Just a little bit about me if you don’t know who I am. My name’s Stan The Annuity Man. I do not have a last name. I’m going to officially change that to The Annuity Man, so when I go through an airport they can page me, “Stan The Annuity Man”. My wife’s not on board, but everything’s a function of sales as we know. So I am the top independent agent in the country, if not that I am the tallest at six foot six. I’m licensed in all 50 states. I’ve published seven books. Yes, I do write. It’s cheaper than therapy. I’ve got an eighth one on the way and I’ve had over 400 articles published on every website known to man, Wall Street Journal on down. All of those articles can be found on my site. If you want the books you can get them from me.

Let’s quickly introduce the books. My latest book is on Index Annuities. I literally had to throw up while I was writing it. No, I actually like index annuities but they’re just sold improperly. I mean, this is where all the gunslingers and criminals and sociopaths end up selling. Just this and they are good products. They’re CD products, and I’ve written a book on it. Easy read on index annuities.

QLACs, which is what we’re talking about today, actually this was the first book on the owner’s manual side that I wrote. It starting while I was in Chicago of all places. It kind of hit me that when it first came out 2014 I was such a fan of this product and still am, so I wrote an owner’s manual. I’ve also written one on Immediate Annuities, and another on Multi-Year Guarantee Annuities which is the annuity industry version of a CD. Then came the Income Rider Owner’s Manual. These are income benefits that are attached to variable and index annuities primarily. They’re so complex, so oversold and mis-sold products that are overhyped. I had to write a book to help you fully understand what these things are. Also there is an Owner’s Manual about Deferred Income Annuities, which are also called Longevity Annuities, or DIAs. A Qualified Longevity Annuity Contract in essence is a Deferred Income Annuity, so we’ll talk about the minor differences and nuances between the two.

The original book I published was The Annuity Stanifesto. All of my books are currently available on Amazon. If you want free copies, I’ll literally just mail them to you, okay? There’s no catch or asterisk here. No one is going to show up at your door, and no one’s going to call you. You’re not going to get bugged. You can go to my website at stantheannuityman.com to sign up, or you can just send me an email here at stan@stantheannuityman.com. Just make sure you include your shipping address, please. I’m going to mail them in a gold foil package. You’ll think you’re watching Willy Wonka. Remember the Willy Wonka show where they found the golden tickets? It’s currently being sent in a golden package to you. At the time of this recording, you’ll get a golden package. That might change. So email me at stan@stantheannuityman.com, if you don’t have the Owner’s Manuals and the Stanifesto yet. They are very educational.

When buying Annuities, it is all about the Contractual Guarantees.

If you follow me at all, you know I’m all about contractual guarantees. I do not do hypothetical, theoretical, back-tested, projected, hopeful agent return scenarios. I don’t do pie in the sky, I do Armageddon or worst case scenario. Will do, not might do. You own an annuity for what it will do, not what it might do, so we’re looking at contractual guarantees only. With that being said, understand that annuities are commodities, so you shop all annuity carriers for the highest contractual guarantees available for your specific situation.

Look at and download COMDEX Rankings at stantheannuityman.com

Okay, let’s talk about something I provide free on my site for anybody to use- COMDEX rankings. Everyone knows about the four rating services that look at annuity companies: A.M Best, Moody’s, and Standard & Poors, and Fitch. Those are and the claims paying ability of those annuity carriers. If you buy an annuity (including a QLAC), it’s only as good as the company backing up those guarantees. You have got to look at that. Don’t just look at one. On my site, because I’m such a giver … I give, give, and give. Never take. I give away free access to COMDEX rankings. Go to the website and click at the very bottom where it says "download your free COMDEX report." Every month we update this. I pay a ton of money for it. I give it away to people so they can make an informed decision. Take a look.

If you see, you can see A.M Best, S&P, Moody’s, and Fitch. Okay, you can see all of those ratings and there’s not a person on the planet that knows what AA, AAA, AAAA … Sounds like we all have an alcohol problem. No offense to anybody, but hey, here’s the thing. COMDEX looks at all four of these rating services and puts them through their literally fancy algorithms. Everybody gets a score from 1 to 100, with 100 being perfect. Look at the right hand side of the COMDEX chart and you find all the annuity carriers COMDEX rankings, from 100 all the way down. You can now look at the all companies. Forget stand-alone rating services like A.M Best. Forget S&P, forget Moody’s, and forget Fitch. Look at the COMDEX compilation ranking. I give that away for free. Please use this as a resource, okay?

All annuity solutions. I hope Fisher Investments (I like those guys, great guys), but I hope they’re listening because you can’t say I hate all annuities and you can’t say I’d rather go to hell than own an annuity. Why? Because there’s so many types of annuities. That’s like saying I’d rather go to hell than go to a restaurant. I’d rather go to hell than wear a pair of shoes. That’s crazy. You can’t hate all shoes, you can’t hate all restaurants, and you can’t hate all annuities. Annuities are contracts. If you hate annuities, you hate social security. If you hate annuities, you hate your pension and nobody does that.

Two questions you need to ask and answer to find out even if you need an annuity.

  1. What do you want the money to contractually do? Key word contractually.

  2. When do you want those contractual guarantees to start?

So with QLACs we’re going to ask these questions as well:

What do you want the money to contractually do? And When do you want the contractual guarantees to start?

Notice I’m not talking about hypothetical, or theoretical events, I’m talking about contractual realities. These are the only two questions you need to ask in order to determine if you need an annuity. This is how simple annuity buying should be, okay?

Annuities only fit into four places in your portfolio:

  1. First is legacy.

  2. Second is income,

  3. Third is long-term care / confinement care

  4. Fourth is safety, or principal protection.

Notice there’s not market growth there.

Listen up everybody. Do not buy annuities for market growth. If you want market growth, don’t buy an annuity. I don’t care if it’s a variable annuity or index annuity. I don’t care what the agent says. I don’t care what the hypothetical scenario says. I don’t care what the back-tested report says. I don’t care. Do not buy annuities for market growth. Buy them for the contractual guarantees. Understand also that annuities are transfer of risk products. You are always transferring the risk to the annuity company to solve for a specific situation, okay?

I’ve come up with an easy to understand acronym to understand if you need an annuity. The acronym is PILL.

Everybody repeat after me. PILL. One more time. PILL.

  • P stands for principal protection.

  • I standards for income for life.

  • L stands for legacy and the other

  • L stands for long-term care.

Principal protection, income for life, legacy, and long-term care. Hey, there’s no M for Market. There’s no G for growth. This is it. If you want to contractually solve for one or more of these problems, then you might be a candidate for an annuity. There’s a bunch of annuity types. I’ve got all this owner’s manuals on different types of annuities. So, PILL. Remember the PILL. Read the books too, so you understand which annuity types solve these issues.

Let’s talk about QLACs. Where do QLACs fit in the PILL?

That’s what they were put on the planet for, alright? Let’s talk about the history of QLACs real quickly and go over that. In 2014, our friends at the IRS and the Treasury Department said, "You know what? We need to start convincing the youngsters of the world to plan for income down the road." It’s kind of a shot across the bow to social security means testing and what’s going to happen to social security. They want people to, within a 401k or whatever, to have a choice like a QLAC, so they can plan for their own future income. In essence, the IRS and Treasury wanted the 401ks that defined contribution market to have these QLACs; some do. They’re slowly being implemented into retirement plans, but their true winners are you people out there with Traditional IRAs, non-Roth IRAs. Traditional because it’s a DIA structure.

QLACs are income for life products.

A deferred income annuity is also called a longevity annuity. QLACLA is longevity annuity. It’s a future pension. You can defer out for a specific period of time, and then you start a pension type payment that lasts for the rest of your life. The difference with QLACs and DIAs is: DIAs can be used in IRAs but only up to age 70.5. Beyond age 70.5, you need to use a QLAC structure. The good news is some 401ks are actually offering this. In a 401k you might have a mutual fund choice and also a QLAC, because the youngsters of the world need to start planning for future income, okay?

So why would you consider a QLAC in your Traditional IRA? Does your Traditional IRA need a QLAC?

Top reasons to place a QLAC within your Traditional IRA.

  1. A QLAC is a future pension guarantee. – A QLAC is a transfer of risk pension plan that starts at a future date. You tell the annuity company when you want payments to start, so it’s a future pension income guarantee.

  2. You can add a spouse to a QLAC with lifetime income guarantees for both of you. – What I love about a QLAC is that you have an IRA, and you’re going to take your spouse and attach them to the payment. In other words, you can say, "Alright, it’s my IRA, it’s in my name, but I want my spouse to get a Joint Lifetime income. When my Learjet hits the mountain and she’s driving back from the funeral crying, she or he knows that the income stream is going to be uninterrupted and unchanged. You can set up Joint Lifetime income using QLACs! Okay?

  3. QLACs have no annual fees and no moving parts. – I Love this part. No annual fees, no moving parts. All the people that say, "I don’t like annuities because they’re so fee high. They all have high fees." Whatever. Wrong. QLACs have no moving parts and no annual fees. Period. Do agents like me get paid a commission for selling a QLAC? You’re darn tootin’ we do. The commissions are low because the QLAC product is designed so simplistic. Low commissions are okay, because who cares? I hope that commissions all come down to the same level for all products, but that’s another discussion. Just remember that QLACs have no annual fees. Nothing’s going to be deducted from your account, okay?

  4. A QLAC can lower your Required Minimum Distributions (RMDs). – Here’s a big one, too. With QLAC’s, you can legally … No gray area … Legally lower your RMDs, because the money used in a QLAC is not included as part of your RMD calculation. Big deal. Now, are your savings in RMDs going to be so big that you just can’t believe it? No. It’s going to be small. It’s not going to be great, but it’s legal and if you want to lower your RMDs, QLACs are the only product to do that.

  5. You can put $125,000 or 25% or your total IRA assets into a QLAC, whichever is less. – If you have a million dollars in all your IRAs, you can put $125,000 in a QLAC. If you have $500,000 in all of your IRAs, again the limit is$125,000. Easy math question ahead for an example of how to determine amount allowed in a QLAC: If you have $100,000 total in your IRA, how much can you use in a QLAC? You can use 25% of that amount, so $25,000. Now will these limitations go up? Yes. Our friends at the IRS and the Department of the Treasury have indicated they will raise the rules and the limitation, but right now it’s a $125,000 or 25% of your total IRA assets.

  6. A QLAC can combat inflation with income starting at a future date. – Now, one of the things I like about QLACs is you can defer the income later in your IRA and that’s a really good way to combat inflation. People always say, "Well Stan, why wouldn’t I just buy a COLA, a Cost-of-Living Adjustment Rider or CPI-U Rider attached to an annuity?" When you attach a COLA to an annuity, they just lower the payment. Annuity companies have the big buildings for a reason. They do not give anything away. Correct? They don’t. Nod your head. They do not give anything away. They have the big buildings for a reason and you can see their big logos on a Learjet.

Nobody knows where inflation is going, but the way to attack inflation is to have income starting at a future date. QLACs allow you to do that as well and here are the rules.

  • You can start QLAC payments as early as 71, but you must start payments by age 85. Now everybody calls me and says, "Stan, I don’t want to defer up to 85." Well then don’t. You can start it at 72, 73, 74, or 75. Do whatever you want. At age 85 you are obligated to start taking the payments from a QLAC, but you have the option to do so between 71 and 85. You can literally ladder these things too. You can say, "Stan, I want half the allowed QLAC amount to start payments at age 80 and half starting at age 85." You can do that. You can customize it. That’s what I’m here for, is to help you put together that type of a plan. Alright?

  • You can structure a QLAC for guaranteed lifetime income, with 100% of any unused money going to family. Here’s the big one. Everybody’s like, "Stan, I hate annuities because the insurance companies keep the money when I die." Wrong! You’re wrong. Of course, you can structure a life-only policy so that when your Learjet hits the mountain, the money goes poof. That policy structure brings you the highest payment because you’re taking on some of the risk. Most people that buy QLACs are buying them so that 100% of the money goes to the list of beneficiaries. It’s going to pay you for life. Even if you live to 190 it’s going to pay you. Then, when your Learjet hits the mountain, whatever premium is left in the account goes to the beneficiaries. If your Learjet hits the mountain before your income starts, 100% goes to the beneficiaries. You just have to indicate to me that is what you want. It’s as simple as saying "Stan, I don’t want those evil annuity dudes to keep the money. I want to make sure that I have two things: lifetime income and to make sure that my family gets the money. Whether it’s me, my spouse or whoever is the beneficiary receiving the premium in full, just make sure the annuity company doesn’t get it." Let’s be very clear. You can do this. This is how we can structure it for you, okay?

What are the differences between QLACs and DIAs? What are their similarities?

A QLAC is a DIA (Deferred Income Annuity) Structure. – A QLAC is really a DIA. It’s the same structure. You look at the policies, same policies but one says QLAC at the top and one says DIA, right?

QLACs and DIAs are future pension plans.

QLACs can only be used in Traditional IRAs and other specified retirement plans (non-Roth). – We’re talking about Traditional IRAs because I do not deal with qualified plans. We’re not talking about Roth IRAs.

DIAs can be used in Traditional IRAs, only up to age 70.5. – You can turn QLAC income payments on from age 70.5 to 85. You can use a DIA inside of an IRA, you just have to turn on the income by age 70.5. Okay? RMD payments have to start at that point, so you can’t defer beyond 70.5 with a regular DIA.

DIAs can also be used in non-IRAs, with no age restrictions. – DIAs can also be used outside of an IRA. You don’t have to use these things in an IRA. A Deferred Income Annuity can be used outside of an IRA and there’s really no age restrictions on payment start dates. There’s no restrictions on when you turn on the DIA income stream outside of a Traditional IRA. Inside of a Traditional IRA you use a QLAC if you want to start payments after age 70.5. DIAs and QLACs are called Longevity Annuities.

There are rules regarding premium levels of QLACs.

Let’s go over the funding rules again, just to be clear. You are allowed the lesser of $125,000 or 25% of your total IRA assets. If each spouse has an IRA, you are allowed $125,000 each or $250,000 total if you qualify. Let’s just say you each have a $500,000 IRA then you would both qualify for a $125,000 QLAC. You have the option to both set up joint income annuitants on that. You don’t have to, but you can. Remember, the dollar limitations were put in place in 2014 and they’re going to go higher. If they go higher, just add more money to it, right? We go to the annuity carrier with the highest guarantee and add more money.

There are three primary reasons why a QLAC actually works well in your traditional IRA.

In my opinion, when you put an income floor in place, you’re a better trader, you’re a better investor because you have that income taken care of and you know what I mean when I’m saying that.

First – QLACs provide future lifetime income for you, or you and your spouse.

  • Income can start as early as age 71, as I said.

  • You have to turn it on at age 85 so you can choose anytime between there when you want to turn it on. By the way, when you’re issued a QLAC policy you have, at the time that you fill out the policy, you have to indicate when you’re going to turn on the income stream. But you get the opportunity to change that start date one time during the policy. Let me repeat that. At the time of application, you have to indicate when you plan on turning on the income stream so that they can price it and guarantee it, but during that policy you can change it one time, okay?

  • Now obviously the longer the interest company keeps the money the more they’re going to enhance the payout. It just makes sense. They’re holding on, the money’s cooking, they’re going to reward you for giving you that money earlier. People always say, "Stan, is it the right time to buy an annuity?" There’s no good answers, just a bunch of bad sales pitches out there. There’s no good answers to that. Either the guarantee makes sense to you or it does not. You can’t time it.

  • Remember, you can add the spouse as a joint annuitant.

  • There’s NO ROI till you DIE! – Annuity companies are on the hook to pay regardless of how long you live. People say "Stan, what’s my return on investment? What’s my ROI on a QLAC?" I don’t know that, but I will tell you, after I sing my song at your funeral and it’s going to be acapella. I don’t need a band. After I sing the song, I’m going to tell the ROI to your beneficiaries after the song is over. There’s no ROI until you die. I don’t know that. It’s a true transfer at risk to the annuity carrier to pay you for the rest of your life regardless of how long you live. Don’t try to do an apples to apples. "Stan if I put money in a Vanguard S&P …" Stop. Okay? We’re talking about contracts. This is a contract. It’s a transfer at risk pension plan. You cannot say apples to apples with investments. Annuities aren’t investments. They’re contracts. If you don’t believe me, buy one and read the contract, or you can say, "Stan, send me a specimen policy.” You can read the contract.

Second – A QLAC lowers your RMDs on your Traditional IRA.

  • QLAC $$ amount is not used for RMD calculations. – This is a big one. I like this. I don’t really like paying taxes. I always tell people I hope one day that I’m rich enough to be just really liberal. It means that I’d have a ton of money, but up until then I’m going to try to pay as little taxes legally as I can. This allows you to do it because the QLAC amount is not used to calculate your RMDs. $125,000 max you can put in.

  • $125,000 is the maximum QLAC $$ amount that can be deducted from your RMD calculation total. – Remember $125,000 or 25% of your total IRA assets, whichever is less, and that’s deducted from the total.

  • When you turn on income from a QLAC, that income stream that comes from the QLAC fully satisfies and covers the requirement of distributions for that money that’s in the QLAC. Now, very important point, it does not carry over into any other part of the RMDs. In other words, the money coming from the QLAC, the income that’s coming out of your IRA from the QLAC covers the QLAC dollar amount, but if there’s any overage it doesn’t cover the non-annuity assets within your IRA. I must be very clear about that.

  • Let’s look at this RMD. I’m talking about RMD as a lower your RMDs example. Let’s kind of look at the map of it so you can put it in your head on how it works. Okay, let’s just say you have a $500,000 Traditional IRA. I’m just doing this for easy math, okay? Which means that you qualify for $125,000 so 25% of your IRA total, or $125,000, whichever is less, non-Roth so 125. 25% is $125,000, you buy the QLAC, defer it whenever you want, remember you can turn it on at 71 or you can turn it on anytime between 71 and 85. So $500,000 minus $125,000 is $375,000 so when you go to do your RMD calculations, you’re going to calculate it on $375,000.Now people ask me all the time, they say, "Stan, Mr. Annuity Man, what if I’m past 71? What if I’m 75 or 76, 78? Can I still do this? Can I still take advantage of this rule?" The answer is yes, you can. You can. It doesn’t matter age. Once you buy the QLAC, that dollar amount from the QLAC is deducted from that next year’s RMD calculations.

Third – Legacy is a primary reason to consider a QLAC.

  • QLACs can be structured so that the spouse can be added for joint life income. – Alright, and then the third thing. We talked about lifetime income and lowering your RMDs. What’s the third thing that you just kind of slap your head and go, "Man, this is not a bad deal"? Legacy. You say, "Wait a minute, Stan. Legacy." Yeah, legacy! Here’s what it is. To me, you know, I’ve been married for 29 years. I’m telling you right now, she should be leaving me right now. If you’ve met my wife, I married way above myself. She should leave me but she hasn’t, so the legacy I can leave for her is within my IRA. I can set up a QLAC, which I have by the way, so that it’s Joint Life payout. When she comes back from the funeral and she is crying because I’m gone and she can’t imagine life without me, which is hard to believe. I mean, she’d be like, "Oh my, what am I going to do?" She knows that that IRA has a QLAC in it that will set up Joint Life so that income that we’ve been getting is going to be uninterrupted and unchanged for the rest of her life. We also set it up to when she passes away that the kids get whatever money is left in the account. The evil annuity company doesn’t get any.

  • QLACs can be structured so that 100% of any unused $$ goes in full to your listed beneficiaries. – In other words, remember QLACs can be structured so that 100% of the money goes to somebody in your family. You don’t have to do that. You can say, "Stan, I hate my family. They make me sick. I’m going to throw up every time I see a Christmas card." Then do life only. Then do life only and when your Learjet hits the mountain, money goes poof and you laugh, you’re kind of chuckling in the grave a little bit, right? You can do that, but you don’t have to do that. Most people say, "Stan I don’t want to just do life only and lose all the money." You don’t have to do that. Are we clear on that? I keep going over that because people keep calling me believing that fallacy. You know what’s interesting? A lot of advisors and agents erroneously think all annuities are structured life only.

  • If you die before the QLAC income starts, 100% of the $$ goes in full to your listed beneficiaries. – By the way, if your Learjet hits the mountain or your Bentley runs into a tree before the income starts, 100% of the money can go to the family. 100% goes to the family, okay? You can structure your policy so that the annuity company never gets a penny. Let’s be very clear. So those are the three things: lifetime income, lowering RMDs, and legacy.

QLACs are part of your income floor. They provide Income Later.

*QLACs contractually guarantee a specific $$ payment for the rest of your life at a future date determined by you (up to age 85).

If you go to my website, stantheannuityman.com, one of the best websites on the planet, we do have a series of STAMinars/Webinars. Recently we talked about how to build your income floor. What’s an income floor? An income floor is the guaranteed money coming in every month. These guaranteed income payments ensure you’re not going to outlive social security, pension, or other annuity type payments. We can even throw in rental property and dividend stocks and those types of things as well. Okay, QLACs should be considered as part of your income floor and income later. What you’re doing is deferring, within your IRA, to a future income start date. You have to start payments at age 85, but you can start it as early as age 71. It’s going to pay you for the rest of your life.

Understand this. Listen. Put the drink down. Listen to me. QLAC lifetime income streams and lifetime income streams, or any annuity payment for that matter, is primarily based on your life expectancy at the time you take the payment. Rates play a role, yes, but they are a secondary consideration. If you say to me, "Stan, I’m going to time rates”, you’re an idiot, okay? You can’t time rates, because you can’t time your life expectancy, right? It works just like social security. The longer you wait, the higher the payment. Why? Because the less life expectancy you have, the less payments they’re expecting to pay you. Same thing applies with the QLAC payments. The longer you defer the higher the payments, because there is less life expectancy.

*QLACs work perfectly to combat future inflation.

*QLACs should be part of your overall income flooring strategies.

We can ladder these things. You can say, "Hey Stan, I want to do 60K and have income start at age 80, and for the other 65K I want to do income starting at age 85." We can do that. Tell me what you want to do. Tell me what you want the money to contractually do, and when you want those contractual guarantees to start.

*Remember you can add your spouse to a QLAC policy as a joint annuitant as well.

*Income start date can be changed one time with most QLAC policies.

QLACs provide Legacy Income for your spouse.

  • QLACs allow your spouse to have a pension payment even though it’s your personal IRA. – Understand that when you add another person to a lifetime payout, instead of payments for one life it pays throughout both lifetimes, the difference is it’s going to be a lower payout, right? It makes sense. If your spouse is significantly younger, they’re going to just ignore you and base the payment on the younger of the two. That’s just the reality of life expectancy and its role in determining payout levels. Statistically most females are expected to outlive their male counterpart. I think that’s evil, but it’s true. It is what it is, and the annuity carriers don’t ignore those statistics when defining payout levels. Legacy income for your spouse is a big, big deal.

  • QLAC guaranteed payment is based on your life expectancies at the time the income starts. – It’s based on life expectancy, so at the time you start the payment they’re going to really look at the younger of the two. They’re basing payment levels on two lives and looking at the life expectancy. If one spouse has an IRA and the other spouse has an IRA, there’s also nothing wrong with each of you doing a QLAC and not adding the spouse. When we run QLAC quotes for you, I have no problems sending you both, so you can lay it all out on the table. You can compare: “This is with me only, this is with me and you, this is you only, this is with me and you.” That’s the way you should look at it. Look at all options and choose the guarantee that makes sense.

  • After you die, QLAC continues uninterrupted & unchanged for the remainder of your spouse’s life. – If you set it up Joint, the income continues uninterrupted and unchanged for your life and the rest of your spouse’s life.

  • You can set it up so that 100% of the money goes to the listed beneficiaries of the policy when you are both gone. That’s called Joint Life with Cash Refund. Let’s break that down. Joint Life – It’s going to pay you Joint Life regardless of how long you live. Cash Refund means that whatever is left in the account goes lump sum to the listed beneficiaries of the policy.

The Annuity Company doesn’t keep a penny! A QLAC is fully principal protected, and your family will receive all the original premium back in some way.

  • QLACs can be structured “Single Life with Cash Refund” or Joint Life with Cash Refund” – In a DIA account that is not in an IRA you can do what’s called an Installment Refund, but in a QLAC within an IRA it has to be Cash Refund. You can set up a QLAC for the owner of the IRA (Single Life), or for the owner and spouse (Joint Life).

  • “Life with Cash Refund” means that the QAC will pay you regardless of how long you live, and 100% of any unused $$ will go LUMP SUM to your listed beneficiaries. – This is the remaining allowable amount kept in the QLAC going lump sum to the beneficiaries upon your death, or upon the second spouse’s death depending on if you have it set up Life or Joint Life.

  • If you die before the QLAC income starts, 100% of the money goes LUMP SUM to your listed beneficiaries. We’ve kind of gone over all this. I’ve beaten that into the ground, but I want you to understand that it is fully principal protected. You’re transferring the risk of outliving your money to get guaranteed lifetime income payments, and you know that money you’re giving to the annuity company will go to somebody in your family if you decide to set up Life with Cash Refund or Joint Life with Cash Refund.

  • If you live forever…and $0 is left in the QLAC account, the annuity company is still “on the hook” to pay regardless of how long you live. – If you outlive your life expectancy, then you get a statement from the QLAC annuity carrier that says, "QLAC is worth zero." Who cares? They’re on the hook to pay regardless of how long you live. Remember, QLAC payments are a lifetime income stream payment. Any payment from an annuity, is a combination of return of principal plus interest. Okay?

QLAC Benefits & Limitations

I love doing this with all products. If you read my books, you know that I do this. They’re not sales pitches, just facts. These are contracts. You can’t polish them up. I’m going to say this. My wife’s going to grimace when she listens to the replay. You can’t polish a turd but you can roll it in glitter. Think about that. But the point is, all annuity products have good and bad. Let’s go over the good of a QLAC. I can’t believe I said that, but you can steal that from me if you want to. You can’t polish a turd but you can roll it in glitter. My daughters love that.

QLAC Benefits

  • Guarantee lifetime income and combat inflation.

  • There are no annual fees, and no moving parts. Does the selling agent get paid? Yes, we get paid from the annuity company reserves. You’ll see 100% of your money go to work.

  • You can add your spouse as Joint Annuitant

  • You can lower your RMDs

  • You can choose when to start your income between the ages of 71 to 85.

  • These babies are transparent, simple and easy to understand. I always tell people if you can’t explain it to a nine year old, no offense to nine year olds, then you shouldn’t buy an annuity. That would pretty much do away with a lot of these index and variable annuity sales. I’m going to tell you, there’s about five people on the planet that understand those things and I think I know the other four. I’m going to tell you, indexed and variable annuities are complex, and QLACs are basic. Here’s the money, here’s the guaranteed income, no annual fees, no moving parts.

What are the limitations of a QLAC?

I’m going to spend some time here because you need to know this. If it sounds too good to be true, it is every time with an annuity, so what are the limitations?

  • In my opinion, the main limitation is the $125K, right? For those of you players out there that got the million dollar IRA, the two million dollar IRA, $125K is just a non-event. It is what it is. The rules are in place. It will go up, but it’s a limitation.

  • There’s also no liquidity or surrender. The IRS and the Treasury Department, put this limitation in place for a reason. It’s so that people can’t buy a QLAC and then call me up saying, "You know what, Stan? Forget it. I just want to buy a boat. Send me the money.” The IRS and Department of Treasury did not want people to pivot. They did not want people to change their minds. They wanted people to commit to putting a guaranteed income stream in place that would supplement social security. Social security was never put on the planet to be everybody’s 100% pension plan even though it’s turned into that. So there’s no liquidity or surrender value on a QLAC. You are going to get all your money back or somebody in your family is if you structure it that way, but you can’t pivot and say, "You know what, Stan? I don’t want to do that anymore. Send me my $125K back." No, no, nope. Not going to happen.

  • You can change the start date of the income stream to start it earlier, but that’s a limitation. You can only change the start date one time. I don’t think that’s a big limitation.

  • There’s no documented growth during deferral time. Period. Here’s another one that people just get hung up on. I get it. Totally get it. You don’t have to send me the emails and the flow charts. Now, we all understand that if you give money to an annuity company and they hold onto it, they’re going to enhance the payment. I call it cooking. The longer the money cooks there, the more they’re going to pay you, but if you said, "Stan, I’m going to buy a QLAC at age whatever and defer it at age 75" and you died at age 74, then your beneficiaries are going to get $125,000 back. There’s no implied interest … There’s no interest that you can track internally. To some people that makes the top of their head explode because they are looking at a QLAC and comparing it to an investment. There’s no comparison. A QLAC is a contract and this is a limitation. The biggest limitation for most people is there is no documented growth. You just got to get over it. It is what it is. Know this, there’s an implied growth amount: meaning that if you did buy a QLAC and you had your money in investments it’d have to grow by a certain amount to create this type of income stream, okay? It is what it is, but there’s no interest rate that they attach to it that you can track.

How do you get a QLAC quote?

This is simple. You can just go to the site if you want, Stantheannuityman.com, which is the easy way. We have a "Get A QLAC Quote" button, and can fill out a little form there you. If you prefer, you can just email the following information to me:

  • Date(s) of birth.

  • State of residence (because all annuities are regulated at the state level, not the federal level, so not all products and annuity carriers are available in every state). When an annuity carrier comes out with a QLAC they have to go to each state and get it approved. I know that sounds crazy, doesn’t it? But it’s true and that’s the way the annuity industry works, especially on the fixed level and QLACs are fixed annuities. They’re not securities. They’re not overseen by the FCC, etc.

  • Amount of money. 25% of your IRA or $125,000. Remember that rule.

  • When you want the income to start? Remember you can change it, but we need to have a start date to run it. Earliest is 71, latest is 85.

  • Then tell me, "Life Only. I hate my family" …You might not hate your family – you just want the highest payout. If you want Life with Cash Refund just say, "Stan, I want 100% to stay in the family, but I want a lifetime income guarantee" Okay?

People will call me and ask, "Well Stan, what’s the best QLAC out there?" I don’t know. I don’t know! I represent everybody out there. I’m going to quote all QLAC annuity carriers that are in your state and I’m going to send you the top ones that solve for your situation. QLAC quotes, like all annuity quotes, are like a gallon of milk. Every seven to ten days, things change. It is what it is. They’re commodities. You have to shop all annuity carriers. Don’t get fixated on one annuity carrier unless your son or brother-in-law works there.

QLAC Quote Details

  • A QLAC quote will show you available guaranteed monthly lifetime income starting at the date you indicated.

  • It will show, depending on the state, the top three to ten guarantees for your state of residence. It’ll list the annuity carriers and their ratings. We usually run these on a monthly income for life basis.

  • The quote’s run using A.M Best ratings, and the COMDEX rankings as well.

Remember 100% of the QLAC income is taxable. QLAC income comes out of the IRA, and it fully covers the RMDs required for the QLAC asset, alright? People ask me all the time, "Stan, can I have a QLAC income stay in my IRA?" No. You cannot. When you turn on QLAC income it comes out of your IRA. You pay taxes on it. 100% ordinary income, and it is what it is. You can’t defer a deferral, and you can’t have your cake and eat it too. People ask me that all the time…

QLAC Applications are done Online or Hard Copy

Depending on the annuity carrier, we do online or hard copy applications, and everything’s encrypted and secure. Everything’s done through FedEx and by phone with the staff. We have the best staff in the world. It is what it is. We never, ever, ever share information or sell it. It stays encrypted in our database and if you’re in our database you know that we don’t bug you. We treat you like a professional and a grownup. Everything’s fully confidential.

Life expectancy determines the payout on an annuity, and interest rates play a secondary role.

Don’t say, "Well Stan, your rates are low. I don’t want to buy a QLAC." What do you mean rates are low? You mean your life expectancy? Yes, interest rates play a role. The 10-Year Treasury is the bogey. The United States 10-Year Treasury. But it’s going to have to significantly move the needle to make much difference. You can time it if you want, you can try to be a guru if you want, you can try to be Michael Milken (if you remember who he was) if you want, but life expectancy drives the train. Understand that. It’s the primary pricing mechanism and interest rates do play a role. What is the combination? The income combination for all lifetime income guarantees is return of principal plus interest, right? The return of principal plus interest part is obviously determined by, and primarily based on, life expectancy. Just remember that, and try not to be a guru.

Implied Longevity Yield = “Cooking” the $ in an annuity

  • The longer the deferral period the higher the payment. – We talked about cooking the money at the annuity companies. The longer they hold onto it, the higher the payment. In the industry there are some people who have the elbow protectors, and the ascot and they’re smoking the pipe – they call it implied longevity. I love that. I’m from the south. I’m from North Carolina on a farm. We call it cooking. In the south, we call it cooking. The longer you let the money cook, the more they’re going to pay you. That’s the way my dad would say it. That’s the bottom line. That’s what implied longevity is.

  • “Implied Longevity Yield” is what you would have to earn on the money during deferral and before income starts (i.e. annuitization). – All you quants out there who want to run the algorithm; how much money would you have to earn on an annual basis compounded and then annuitize? Problem with this line of thinking is, you don’t know what the annuitized rates would be at the end. The point is, they do cook the money, and they do enhance the payout the longer you let them hold onto the money. Annuity companies are smart. They sit around the big marble buildings asking the same questions you ask, making sure that there is no arbitrage and no pricing mistakes. There is no timing it. There is no 200-day moving average. You either like the guarantee or you don’t. There’s no good time or perfect time to buy a QLAC, or any annuity for that matter. You just look at the guarantee. If the guarantee makes sense, you might want to transfer the risk, put your spouse on there for life and lower your RMDs in the process. It might be for you.

  • There’s no visual interest rate on the QLAC statement. – If you put $125,000 in and you’re going to turn income on at age 80 and you died age 78, your family gets $125,000 back. You shouldn’t be mad about that because you’re dead. Why would you be mad when you’re dead? It’s impossible to be mad when you’re dead because you’re dead, but I know a lot of you out there will be like, "Oh, that makes me mad because I didn’t get interest." Hey, it is what it is. That’s the way the QLAC is structured.

There are rational reasons to like a QLAC, because I’m rational, right?

QLACs are a "Will Do." Product

QLACs provide guaranteed income. – They have contractual guarantees. You want to focus on what they will do, not what they might do. There is no "might do" with a QLAC. It’s a "will do."

  • QLACs provide guaranteed income

  • QLACs are transfer of risk contracts – transfer the risk of outliving your money.

  • QLACs can be set up for joint lifetime income with your spouse. – You can set it up Joint Life

  • QLAC income is contractual

  • A QLAC is a pension, and you don’t have to risk losing a penny.

QLAC Considerations

  • Do you want to add your loving spouse onto the quote? My advice is if you’re up in the air, look at both. Look at a Life Only quote and look at one set up Joint Life. If your spouse is treating you bad, look at them and say, "Hey, I’m going on with my life. Forget you." No, don’t do that. That’s not good. Marital bliss is always a good thing.

  • Do you want the highest payment? It’s (“Life Only”), or to make sure 100% of the $$ goes to someone in your family (“Cash Refund”). We can show you quotes based on Your Life and Cash Refund, or Life Only, and/or Joint Life and Cash Refund or Joint Life only. Whichever you want to see. Remember the two primary choices. I have no problem showing you both. There’s no obligation and we’re not going to chase you down. You’re a grownup. You can make your own decision on your own money. We’re just here to help you by providing you with the best quotes and the best information on the planet.

  • When do you want the income to start? You decide when you want the income to start.

  • How much $$ (125,000 or 25% of your IRA assets) do you want to place in a QLAC? You decide how much money to use. Remember, the options: the lesser of $125,000 or 25%.

Remember, there’s no perfect answers about all annuities, but there are bad annuity sales pitches.

  • QLACs should be part of your “Income Floor”

  • QLACs should be used to combat future inflation

  • QLACs can be used for Joint Lifetime Income with your spouse

  • QLACs will reduce your Required Minimum Distributions (RMDs)

  • QLACs can fully protect your principal, and can be structured so the annuity company doesn’t keep a penny.

Here are the next steps to take to understand and use QLACS.

  • Get the book. If you don’t have the QLAC Owner’s Manual, get the book. If you threw away the first one I sent to you, call me back. I’ll get you another book because I’ve got a different picture on the back. It’s a lot better, and I’m a lot thinner. Yeah, get the book. Call me and say, "Hey Stan, I need the book again. I need the QLAC Owner’s Manual." If you are missing any of the other Owner’s Manuals, I’ll send them all to you, alright? Email me your physical mailing address to stan@stantheannuityman.com , then let me go shop some QLACs for you. Let’s look at building part of your income floor using your traditional IRA.

  • The QLAC quote button is on the right hand side of the website landing page, just scroll down a bit … You can click that link button and fill in a form there. We’ll shop all annuity carriers for you. Right now there’s around 20ish annuity carriers around that offer QLACs. All the big boys. There’s not some directional Northeast Southern company out there. I love the Northeast Southern name, but I don’t think it’s a company. The point is, all the names you have heard of play in the QLAC game. They really do, and we let you make your decision in your own timeframe and on your own terms. If you want to talk to me, you can schedule a call using the schedule a call button on the site. Other than that, I’m not going to call you, okay? We’ll just do some emails. Check your email. We’ll be in touch that way, and we’ll handle all the paperwork if you want to do that.

Remember with all annuities there’s a Free Look Time Period. You get to actually kick the tires and hold the policy, then if you don’t want it you can get your money back. You don’t even have to give them a reason why. Everything that we do is online, and by phone and FedEx. I’m licensed in all 50 states.

Here’s my contact information stan@stantheannuityman.com . You can email me the specific details, go to the website at stantheannuityman.com, or you can call me at 800.509.6473.You can contact me easily through the website. The landing page has another stunning picture of me at www.stantheannuityman.com . I know, it’s an unbelievably attractive picture. My youngest daughter, who’s going to college says, "Hanging out with you, Dad, is pretty cool because you can see a midlife crisis in real time." She’s probably right about that, but it is what it is. My wife’s been with me for 29 years and she can’t leave under contract.

With that being said, we’re doing these webinars we call STAMinars every month. I appreciate you being with us. Do me a favor and get a QLAC quote. It won’t hurt you a bit. There’s no obligation and no cost. We would love to help you establish more of your income floor using your IRA. My name is Stan The Annuity Man Thanks for your interest in the QLAC webinar. Please contact me for the books or for quotes. I’ll see you on the next STAMinar.