Annuity Comparison DIA vs. QLAC
Hi, there. Stan, The Annuity Man, America's annuity agent, licensed in all 50 states. Today we're discussing annuity comparisons, QLACs, Qualified Longevity Annuity Contracts versus DIAs, Deferred Income Annuities. We're going to compare them. We're going to talk about how they differ, how they're the same, and all that stuff. Why you should look at them, why you shouldn't look at them. In other words, the brutal facts, because as you know, I'm the walking middle finger of annuity truth.
So, we're talking about retirement insurance, income insurance. That's what annuities provide; lifetime income guarantees. You've got car insurance, you've got home insurance, you've got fire insurance, you've got dental insurance, you've got health insurance. Guess what you need? Income insurance, retirement income insurance, and that's what annuities can provide. We're talking about Qualified Longevity Annuity Contracts and Deferred Income Annuities today.
It Starts with DIAs
It all starts with Deferred Income Annuities. Why? Because a Qualified Longevity Annuity Contract is a Deferred Income Annuity, but Qualified Longevity Annuity Contracts can only be used in qualified accounts, i.e., Qualified Longevity Annuity Contracts. They were put on the planet in 2014 and it’s actually the newest type of annuity. Our friends introduced it at the IRS, and our friends at the Department of the Treasury, because they wanted retirees to start planning for income using their traditional IRA assets. There are trillions, and trillions, and trillions, and trillions, and trillions of dollars in IRAs, and the government's always looking and salivating, going, "IRA assets. How do we get to those?" That's what they're saying, and they're that emotional.
But they want people to plan for future income because Social Security, which, by the way, is the best inflation annuity on the planet that all of you own if you have a social security number. So, all you annuity haters, you already own an annuity, so calm down a little bit; I know that's a shock. But for Qualified Longevity Annuity Contracts, the government says, "Can you use the IRA assets for future income? Could you do that for us and maybe take a little bit of the load away from Social Security?" That's really what a Qualified Longevity Annuity Contract's all about.
Annuity Owners Manuals
I have written books on all these topics: Qualified Longevity Annuity Contracts and Deferred Income Annuities. Go to my site and sign up for the books. You can download all 6 of my owner's manuals; two of those six will be Qualified Longevity Annuity Contract owner's manual and DIA owner's manual. So those can really help. In addition, if you go to our YouTube playlist, click that, you'll see a lot of videos I've done on QLACs and a lot of videos I've done on DIAs. But Qualified Longevity Annuity Contracts, at the time of this blog, that's key, at the time of this blog, you can put in up to $200,000 in your personal IRA, using money in your IRA to fund a QLAC.
The rules are that you can defer as far out as age 85, but you don't have to go that far. Many people say, "Well, I don't want to defer my QLAC to age 85." You don't have to, but that's when the IRS and the Department of the Treasury say, "You've got to turn on the income." Now, here's the good news about QLACs. Number one, you can add your spouse or partner for joint lifetime income using your personal and traditional IRA. That's a good thing. The other thing that I think is positive is, let's say you qualify for the $200,000 that you can put into a QLAC. That $200,000 is not used when you take your Required Minimum Distributions, which at the time of this blog, is age 73.
Required Minimum Distributions
When you factor in your RMDs and add up all your assets, that $200,000 and QLAC is not part of that Required Minimum Distribution. But when you turn on that income stream for the QLAC, that income stream amount fully satisfies that amount in the QLAC. I mean, QLACs are great. In a perfect world, I think they might be the top-selling annuity type on the planet. The reason it probably will never happen is that a lot of annuity agents, RIAs, and advisors don't even know what a QLAC is.
I was brought in recently to a large bank, and I won't name the firm, but a large bank, one of the top five banks, to talk to their advisors and to explain to them what a QLAC was because their clients needed to know about it. In my opinion, if you have a traditional IRA, you need to be quoting the QLAC because to me, it's a future income stream that can combat against potential and future inflation. It's a no-brainer. And when set up with your spouse or partner, it's a lifetime income stream that neither of you can outlive. As long as you're breathing, as long as you're doing that, you're going to get the payment. It's a transfer of risk. Lifetime income insurance, lifetime income insurance that the annuity company's on the hook to pay as long as you're breathing. But a QLAC is a Deferred Income Annuity. Deferred Income Annuities were on the planet before QLACs, QLAC is just a version of a Deferred Income Annuity, and it has those limitations. It has to be used in a qualified account and has premium limitations, etc.
A Deferred Income Annuity has no limitations. There's no $200,000 limitation with a Deferred Income Annuity inside an IRA, with income starting before age 73. You can put in as much as you want. You can go to my site, run quotes, and put in as much as you want. You can run a lump sum, or you can run a reverse engineer, meaning I want to have $2,200 of income start in seven years. I'm age 62, using my IRA assets, so it starts at age 69, and we'll quote all carriers to find the top carriers that you can use the least amount of money to solve for that contractual amount.
Both QLACs and Deferred Income Annuities have no annual fees, no moving parts, and no market attachments. It's a straight transfer of risk for future income. Deferred Income Annuities, in essence, come from the Immediate Annuity. If you want the family of annuities for lifetime income, it's Immediate Annuity, Deferred Income Annuity, and QLAC. All have the same structure, no annual fees, no moving parts, and no market attachments. An Immediate Annuity becomes a Deferred Income Annuity once you defer past that one-year time period. But really, these are excellent transfer risk pension products, and you can structure them in a myriad of ways. You could structure them as life only, life with cash refund, life with installment refund, or life with period certain. If you want a customized quote, I encourage you to go to my site, and let's talk about what you want the money to contractually do and when do you want those contractual guarantees to start. Those are the two questions I always ask. And then I will run customized quotes quoting all carriers, and we'll use DIAs, we'll use QLACs, whatever you answer, I'm going to take that answer and say, "Okay, this is what we need to do with the IRA asset or non-IRA asset, or Roth IRA assets." Whatever you want to use from an account standpoint. But I like both of these. Both Deferred Income Annuities and Qualified Longevity Annuity Contracts are simple. You can explain it to a nine-year-old, no offense to nine-year-olds. It's easy to understand, it's a pension, and living in a pension-less world where 10,000 baby boomers are hitting age 65 every day, and many of you, them, and us don't have pensions. This is how we create pensions. This is how we know what the income will be in the future, with Deferred Income Annuities and Qualified Longevity Annuity Contracts.
Once again, I encourage you to go to my site, run quotes on them yourself, schedule a call with me if you want to discuss, get the books on them as well. I mean, I'm trying to educate out here. Are these too good to be true? No. The fact is lifetime income is good. Lifetime income insurance is good. Retirement income insurance is good. The question is, do you need that? Do you need more? Do you need to fill in that income floor? With most of us, the answer is yes, and I hope that we talk soon. And with that, I'll see you on the next Stan The Annuity Man blog.
Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.