Qualified longevity annuity contracts have, in theory, existed for nearly three years, but it's only in recent months that insurance carriers have begun to offer these products — finally making the QLAC a realistic planning option.

While the purpose behind the QLAC is relatively simple — providing income guarantees late in a client's life — in reality, this new planning vehicle can reshape the client's entire retirement income planning strategy.

QLACs won't replace Social Security as the primary source of retirement income for many clients but, for the higher income client, the introduction of QLACs into the planning mix can drastically alter even the most basic Social Security strategies, including the typical plan for maximizing retirement income by delaying benefits.

QLACs and Social Security: the basics

A QLAC is an annuity contract that is purchased within a traditional retirement plan, under which the annuity payments are deferred until the client reaches old age (they must begin by the month following the month in which the client reaches age 85) in order to provide retirement income security late in life. 

If your clients aren't asking these questions yet, they will be very soon.

The value of the QLAC is excluded from the retirement account value when calculating the client's required minimum distributions once the client reaches age 70 ½, though the client is limited to purchasing a QLAC with an annuity premium value equal to the lesser of 25 percent of the account value or $125,000.   

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