Qualified Longevity Annuity Contract (QLAC): Rules, Benefits, and 2025 Contribution Limits

What Is a Qualified Longevity Annuity Contract (QLAC)?

Today’s topic: Qualified Longevity Annuity Contracts, also known as QLACs. This is a relatively new offering from the annuity industry. Still, by the end of this blog, you’ll know everything you need to decide whether it fits into your retirement portfolio.

We’ll cover:

• What a QLAC is
• What it solves for
• Its history
• Key benefits and limitations
• How to structure a quote
• Where it fits—and doesn’t fit—in your retirement plan

And at the end, I’ll tell you how to get a free copy of my QLAC Owner’s Manual.

What Is a QLAC?

A Qualified Longevity Annuity Contract (QLAC) is a deferred income annuity designed to provide income later in life. Think of it as solving for “income later.” The unique advantage is that QLACs can be purchased within traditional IRAs and some 401(k) plans. Most people use them in their traditional IRA, and you can attach your spouse or partner to receive a joint lifetime income stream.

QLACs are structurally similar to Deferred Income Annuities (DIAs), but they follow special rules when used inside qualified plans.

A Quick History of QLACs

QLACs were introduced in 2014 by the IRS and Treasury. Why? To help Americans plan for income in retirement, specifically, income later in life. Social Security was never meant to be your only retirement income, and QLACs give you another contractual income source using your qualified IRA assets.

My prediction? QLACs should become the most common type of annuity that people purchase. Why? Because most Americans have the bulk of their retirement savings in IRAs, and most will need future income.

What Do QLACs Solve For?

QLACs solve for two primary needs:

1. Future lifetime income inside a traditional IRA.
2. Reducing Required Minimum Distributions (RMDs) by excluding the QLAC amount from RMD calculations.

You can also structure the policy so that your spouse receives income for life if you pass away. And if neither of you uses up all the money, 100% of any unused funds can go to your listed beneficiaries.

QLAC Rules & Contribution Limits

Thanks to the SECURE 2.0 Act, the rules for Qualified Longevity Annuity Contracts (QLACs) got a major update. Gone is the old “25% of IRA assets or $130,000” rule. Now, as of 2025, you can contribute up to $210,000 per person from your traditional IRA, 401(k), or similar qualified retirement plan.

This is a lifetime limit—not an annual contribution amount—and it applies per person. That means both you and your spouse can each own a QLAC and each fund up to $210,000.

A couple of important rules:

• You can’t use Roth IRAs or non-qualified (after-tax) accounts to fund a QLAC.
• Payments must begin no later than age 85, but you can start as early as age 71.
• Most people fund QLACs from their traditional IRAs; however, certain employer-sponsored plans also allow them.

QLAC Benefits

• Joint Lifetime Income – You can add your spouse or partner as a joint annuitant, ensuring payments continue for their lifetime if you pass first.
• RMD Reduction – The amount you put into a QLAC is excluded from required minimum distribution calculations, which can legally reduce your taxable income in retirement.
• Flexible Start Date – Begin income anywhere between age 71 and 85, giving you the ability to plan payouts for when you’ll actually need them.
• Custom Structuring – You can select life-only, cash refund, or joint life with cash refund options to make sure unused funds go to your heirs if you pass early.
• Laddering Strategies – You can split your funding across multiple start dates—for example, part starting at age 75 and the rest at age 85—to create staggered income streams and more flexibility.

And remember, all annuity income—including QLAC income—is a combination of return of principal plus interest. If you or your spouse pass away before receiving all your principal back, the refund options you choose will determine how that money is passed on to your beneficiaries.

QLAC Limitations

Like every annuity, QLACs come with limitations:

• Rigid Contracts – Once income starts, it’s locked in for life. You can’t take the money back in a lump sum.
• No Market Growth – There’s no interest rate or market-based growth during the deferral period. The upside is that the longer you wait to start, the higher the payments will be.
• Contribution Cap – Although $210,000 represents a significant increase from the previous limit, some larger portfolios may find it restrictive. However, this cap is likely to increase over time due to inflation adjustments.

Structuring Your QLAC Quote

The most common QLAC setups are:

• Joint Life Only: Highest payout, but when both annuitants pass, the remaining funds go “poof.”
• Life with Cash Refund or Joint Life with Cash Refund: Income for life, and any unused funds are refunded to beneficiaries.

Most of my clients choose Life with Cash Refund or Joint Life with Cash Refund. It offers peace of mind—lifetime income plus legacy protection.

Getting a QLAC Quote

At The Annuity Man, we quote all carriers—because QLACs are commodity products. Quotes change every 7 to 10 days, just like airfare or a gallon of milk. You should always shop all carriers to get the highest contractual guarantee.

Getting a quote doesn’t mean you have to buy, but if a quote looks good, we can lock it in and start the paperwork.

Where Do QLACs Fit in Your Portfolio?

They fit if you:

• Want guaranteed income starting at a future date
• Have a traditional IRA and don’t need income now
• Want to protect your spouse with guaranteed lifetime income
• Want to legally reduce RMD obligations
• Prefer legacy protection for your heirs

I recently helped a client with a $1 million IRA who hated RMDs and didn’t need the income but wanted to make sure his wife would be taken care of. We set up a Joint Life with Cash Refund QLAC to start at age 85. Now he has peace of mind, knowing his wife will be financially secure no matter what happens to him.

Get the Free QLAC Owner’s Manual

As promised, I’ve written a detailed QLAC Owner’s Manual that you can download for free. No cost. No obligation. No one will call you. No steak dinners. Click the link to download your free QLAC Owner’s Manual and start learning how this powerful tool might fit into your future income strategy.