The Principal Financial Group, responding to new Treasury Department regulations, has jumped into the business of selling qualified longevity annuity contracts.
While individuals who participate in traditional IRAs and qualified retirement plans are generally required to start taking required minimum distributions by age 70½, QLACs change all that. With the addition of a QLAC, an individual can hold off on the distribution of a portion of their qualified assets, pushing RMDs to a later date (up to age 85).
Federal regulations allow QLACs to be offered with defined contribution plans such as 401(k)as well as to individuals.
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The Principal said it is among the first in the industry to take this action, "which allows individuals the opportunity to extend their retirement savings."
"We monitor public announcements and regulatory submissions of those engaged in the insurance industry," said Sara Wiener, assistant vice president of retirement and investor services. "To the best of our knowledge, we are aware of one other company that is currently offering a QLAC solution and that is AIG. We expect more insurance companies to offer a QLAC solution sometime in 2015."
American General Life started offering qualified longevity annuity contracts in the fall.
The Treasury department issued its regulations last summer, setting off speculation in the annuity industry about which carrier would be first to hit the streets with a QLAC.
Longevity annuity contracts are targeted at providing income for older individuals. The new regulations permit retirees who have other assets in addition to their qualified assets to put off the distribution of some of those qualified assets until later in life, when they may be more in need of the income.
The Principal pointed out several reasons that it might be beneficial for people to put off getting some of their retirement income until they're older.
First, it said, postponement could also put off the need to pay taxes on that money, especially when they don't need it early in their retirement. Second, money that isn't distributed can be present for heirs in case of the death of the retiree. Third, it can be an asset management tool in that it can help retirees plan to have income later in their retirement.
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