What Is a QLAC (Qualified Longevity Annuity Contract)?

A QLAC Is an Annuity That Delays Part of Your RMDs

A QLAC is a deferred income annuity you buy with money from a qualified retirement account. It changes your required minimum distribution (RMD) math. Once you turn 73, the IRS normally requires you to withdraw a percentage of every traditional IRA and 401(k) balance each year, whether you need the cash or not. Money used to buy a QLAC comes out of that calculation entirely. The insurance company holds the premium. In exchange, it promises to pay you a fixed income later in life, for as long as you live, starting on a date you pick when you buy the contract.

That structure makes a QLAC a longevity hedge. It is not built to grow your money. The payout is set at purchase. It does not track the stock market, so a QLAC is not the place to put money you are counting on to grow. Its job is narrower. It guarantees that a slice of your retirement income keeps arriving even if you live well past your own planning horizon, while it shrinks the RMD bill you owe in the years before that income starts.

The 2026 QLAC Dollar Limit Is $210,000

The maximum you can put into QLACs across every IRA and workplace plan you own is $210,000 in 2026, unchanged from 2025. The IRS confirmed the figure in Notice 2025-67, its yearly list of retirement-account cost-of-living adjustments. The notice states plainly: "The limitation on premiums paid for a qualifying longevity annuity contract under § 1.401(a)(9)-6(q)(2)(ii) remains $210,000." The cap applies per person. Someone with a traditional IRA, an old 401(k), and a 403(b) still has one combined $210,000 ceiling across all three. That ceiling does not reset to $210,000 for each account. A married couple gets two limits, one per spouse, since each spouse buys a QLAC with their own retirement money.

The limit rises in $10,000 increments as inflation pushes it up, which is why it held flat this year after last year's increase. Buying more than the limit does not just waste the excess. The IRS treats any amount over the cap as though the QLAC purchase never happened for that portion, pulling it straight back into your RMD calculation.

A QLAC Can Only Be Funded from Pre-Tax Retirement Accounts

A QLAC has to be purchased with money from a traditional IRA, 401(k), 403(b), or governmental 457(b) plan. A Roth account cannot fund one. The rule exists because a Roth IRA already has no lifetime RMD, so there is nothing for a QLAC to defer inside one. Putting Roth dollars into a QLAC would trade a tax-free account with no withdrawal deadline for an annuity that locks the money up until a set start age. That helps no one.

If your retirement savings sit mostly in a Roth 401(k) or Roth IRA, a QLAC is off the table by design. The RMD problem it solves does not apply to you in the first place. Someone with a mix of account types can still fund a QLAC from the traditional side while leaving Roth money untouched. Check our retirement calculator to see how your account mix affects your overall withdrawal plan before deciding where a QLAC might fit.

Congress Removed the Old 25% Cap on QLAC Premiums

QLACs existed years before the current dollar limit, and the rules used to be far more restrictive. Under the original 2014 regulation, you could put in the lesser of $125,000 or 25% of your account balance. A smaller account capped you well below six figures no matter how much you wanted to shelter. The SECURE 2.0 Act, enacted in December 2022, eliminated the 25%-of-balance test entirely and raised the flat dollar limit to $200,000, indexed for inflation from there.

That single change made QLACs usable for a much wider range of account sizes. The balance-percentage math no longer disqualified smaller savers. The same law also confirmed that a QLAC contract may include a free-look period, letting a buyer cancel and get the premium back within a set window after purchase. Someone who looked at a QLAC before 2023 and dismissed it as too small to bother with is working from rules that no longer apply.

A QLAC Defers RMDs but Does Not Cut Your Total Tax Bill

A QLAC changes the timing of your required withdrawals. It does not change the total tax you eventually owe on that money. The premium comes from pre-tax dollars, so nothing is taxed going in. Once the annuity starts paying, each payment is taxed as ordinary income, exactly like a normal traditional IRA withdrawal.

What we see readers get wrong most often about a QLAC is assuming it lowers their lifetime tax bill. It does not. It only reshapes when the IRS makes you count that slice of savings against your RMD schedule, pushing the taxable income out to whatever age you chose as the start date, up to 85.

For someone whose other retirement accounts already generate RMDs large enough to push them into a higher bracket, that timing shift can still matter. Removing $210,000 from the RMD calculation in your 70s and early 80s can keep you in a lower bracket during those years, even though the same dollars get taxed later once the QLAC starts paying. Run the numbers with our RMD calculator before assuming the shift is worth it in your own bracket.

A QLAC Pays Differently Than a Regular Deferred Annuity

A QLAC is a narrow type of deferred income annuity. It differs from an ordinary deferred annuity on three points that decide whether it fits: where the money can come from, what it does to your RMDs, and how late payments can start.

Funding source is the first split. A QLAC only accepts money from a traditional IRA, 401(k), 403(b), or 457(b), while a regular deferred annuity accepts any money, including after-tax savings. RMD treatment is the second, and the more important one: a QLAC's premium is excluded from your RMD calculation until payments start, while a regular annuity gives you no RMD exclusion at all, since the qualified-account balance still counts in full. The latest start date is the third split. A QLAC must begin paying by age 85, a limit the IRS imposes. An ordinary deferred annuity carries no such cutoff.

A regular deferred annuity bought outside a QLAC wrapper offers more flexibility on funding source and start date. But it does nothing to shrink your RMDs while you wait. The RMD exclusion is the entire reason to choose the QLAC version over an ordinary annuity when the money is coming from a pre-tax retirement account. If the goal is simply guaranteed future income and the money sits in a taxable brokerage account, a QLAC is not an option at all, since it can only be funded from qualified retirement money. Our pension vs. annuity comparison covers the broader tradeoffs between a guaranteed income stream and managing the money yourself.

A QLAC Helps Only a Narrow Group of Retirees

A QLAC fits someone with a large enough traditional IRA or 401(k) balance that RMDs will push them into a higher tax bracket than they need to be in. It also fits someone healthy enough to expect a normal or longer-than-average lifespan. Those two conditions are the whole case for buying one: real RMD pressure to relieve, and decent odds of living long enough to collect.

A QLAC is a poor fit if your retirement savings are modest enough that RMDs were never going to strain your tax bracket. There is little benefit to defer. It is also a poor fit if you have a shorter life expectancy than average. The insurance company keeps the premium if you die before your chosen start date, unless you paid extra for a return-of-premium or joint-life death benefit, which lowers the monthly payout in exchange for that protection. And it is a poor fit if you might need that $210,000 for a large expense, like long-term care, before the annuity starts paying. A QLAC's premium is not liquid once purchased.

Three Things That Would Change Whether a QLAC Fits

Three specific facts would flip the answer for someone weighing a QLAC today.

1. A serious health diagnosis after purchase changes the math retroactively. The insurance company already has the premium regardless of how long you live, and only a return-of-premium rider recovers any of it for your heirs.
2. A jump in interest rates changes how much monthly income an insurer can promise for the same premium, since QLAC payouts are priced off the rates available when you buy, not when you start collecting.
3. A future law that lowers the $210,000 limit, or removes the RMD exclusion entirely, would remove the reason to buy one in the first place. Nothing in current law points toward that change.

Check the current limit on the IRS's retirement plans page before buying, since the figure updates most years.

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