Is a QLAC Right for You?

What Is a QLAC and Why Was It Created?

A QLAC is a type of Deferred Income Annuity that can be funded with money from your traditional IRA or certain employer-sponsored retirement plans. You set the income to start at a future date, and with a QLAC, you can defer payments as late as age 85. The money you use for the purchase is excluded from your required minimum distribution (RMD) calculations until payouts begin, which means your taxable income can be lower in the meantime.

The IRS and Treasury introduced QLACs in 2014 to encourage retirees to lock in a guaranteed stream of income later in life. Social Security was never meant to be the only lifetime income source, and QLACs were designed to fill that gap by creating a pension-like benefit that kicks in when you choose. They also work inside employer plans, such as 401(k)s, but for many people, they’re most commonly purchased using IRA funds.

Updated 2025 Rules

When QLACs first came out, the contribution limit was the lesser of 25% of your IRA assets or $130,000. Those limits are now outdated. The SECURE 2.0 Act removed the percentage cap, and the IRS increased the lifetime contribution limit to $210,000 per individual in 2025.

This is a total across all eligible accounts—IRAs, 401(k)s, 403(b)s—and it’s a per-person limit, meaning your spouse could also have their own $210,000 cap. Payments must begin no later than age 85.

The Disadvantages

The first drawback is rigidity. There’s no liquidity in most contracts. Once you buy it, you can’t cash it out, change your mind, or repurpose the funds. That’s intentional—the IRS wanted these to be almost irrevocable so the income stream is guaranteed for later.

Another limitation is the lack of trackable interest growth while you wait. The longer you let the money “cook,” the bigger your eventual payout, but it’s based on life expectancy, not a compounding balance you can watch. And while $210,000 is more generous than the old rules, some retirees may still find the cap limiting if they want to put more toward guaranteed income.

The Benefits

Despite the limitations, QLACs offer benefits that can make them a valuable tool. They provide guaranteed income you can never outlive, whether for your own life or jointly with your spouse. Many choose a cash refund option, so if you pass away before the premium is fully paid out, the remainder goes to your beneficiaries.

You can also ladder contracts—splitting your $210,000 into two smaller QLACs with different start dates, such as age 75 and age 85, to create staggered income streams. You don’t have to wait until age 85 to start the income; you can begin as early as age 71.

Structuring and Quotes

Popular structures include life with cash refund and joint life with cash refund. These guarantee lifetime income while ensuring that your principal is protected for heirs. Life only or joint life only options pay more, but they remove the refund feature, meaning there’s nothing for beneficiaries if you die early.

Getting a QLAC quote is like shopping for airfare. Rates change every 7–10 days, and multiple carriers are in the market. The “best” provider one month might not be the same next month, so your choice should be based on claims-paying ability and the payout available at the time you’re ready to buy.

Where It Fits in a Retirement Plan

QLACs are best suited for individuals who want a guaranteed income later in life, whether for themselves or as a means to ensure a spouse's financial security without market risk. They can also play a role in legacy planning, especially if you choose a refund option. For high-net-worth retirees who don’t need the income now but want to lock it in for the future, they can be a powerful tool. The trade-off is that you give up liquidity for a contractual guarantee.

Final Thoughts and Free Guide

The 2025 increase to a $210,000 lifetime limit, combined with the ability to defer to age 85, makes QLACs more appealing and flexible than they’ve ever been. But they’re still a long-term commitment. You need to be comfortable setting money aside now in exchange for income you can’t outlive later on.

If you’re considering a QLAC, the smartest first step is to educate yourself. You can get a free, no-obligation QLAC Owner’s Manual from The Annuity Man—no sales pitch, no “free dinner” seminar, just straightforward information to help you make the right decision for your situation.