Buy a $210,000 QLAC Inside Your IRA and the IRS Stops Counting That Money Toward RMDs Until You Turn 85

Moving $210,000 from a traditional IRA into a QLAC cuts a $1M retiree's first RMD from $37,736 to $29,811.

Once the premium is paid, the money is permanently illiquid with no cash surrender, no emergency access, and no way to undo it.

QLACs suit healthy retirees with longevity in the family and ample liquid assets outside the IRA, not those with thin reserves.

Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years. Our free reader guide explains the flaw that separated them, and the income-first method built to avoid it.

Move up to $210,000 from a traditional IRA into a qualified longevity annuity contract, and the IRS treats that slice as if it vanished from the balance that drives your required minimum distribution. The money is still yours. It just stops counting until income begins, as late as age 85.

That is the entire pitch of a QLAC, a niche piece of the tax code that has quietly become one of the few legitimate ways to shrink RMDs on purpose.

A qualified longevity annuity contract is a deferred income annuity purchased inside a traditional IRA, 401(k), 403(b), or governmental 457(b). Treasury greenlit it in final regulations issued in 2014 under Reg. 1.401(a)(9)-6, and the SECURE 2.0 Act rewrote the dollar limits in 2022.

The mechanics are narrow. You hand an insurance company a lump-sum premium today. The insurer promises a fixed monthly check starting at a future date you pick, no later than the first day of the month after you turn 85. In exchange for that promise, the IRS lets you subtract the QLAC premium from the year-end IRA balance used in the RMD formula.

Under SECURE 2.0, the lifetime premium ceiling is a flat dollar cap (the old 25%-of-balance rule was scrapped), $200,000 in 2023 and indexed for inflation thereafter. For the 2026 tax year the cap sits at $210,000. That is per person, across all your retirement accounts combined.

The 4% Rule is Broken, Built On A World That No Longer Exists

Every retiree knows about the 4% rule, but it frames retirement as a slow liquidation and still causes retirees with seven-figure accounts to agonize over a dinner out.

There's a different way to run the math that makes more sense today. Build an income floor — dividends, interest, and Social Security that cover your essential bills every month — and you never have to sell shares into a down market just to pay them.

Our free reader guide, The 4% Rule Is Broken , walks through it in about 15 minutes. Access the report here.