A qualified longevity annuity contract is a deferred annuity that begins to make payments to contract holders at some future date. Payments can begin no earlier than age 70½, but as late as age 85. The major benefit of a QLAC is that it allows contract owners to legally postpone required minimum distributions (RMDs) to the start of the deferred annuity date. Once funds have been invested in a QLAC, they are no longer taken into account for RMD purposes.
Under current law, an owner of a qualified defined contribution plan, such as a 401(k), a 403(b) plan, a governmental 457(b) plan or an IRA has the ability to take the lesser of 25 percent or $125,000 of their account balance by investing in a QLAC, which could help them to defer taking the RMD on at least this portion of their retirement portfolio.
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