The IRS allows retirees to exclude $210,000 from IRA required minimum distributions until age 85 using QLACs, reducing taxable income.
Retirees can now allocate up to $210,000 from an IRA into a Qualified Longevity Annuity Contract (QLAC), delaying required minimum distributions (RMDs) on that amount until age 85. The cap increased from $200,000 under SECURE 2.0, indexed for inflation.
For example, moving $210,000 from a $257,000 IRA reduces the RMD base to $47,000, potentially lowering Medicare IRMAA surcharges. QLAC payout rates, tied to the 10-year Treasury yield at 4.7%, currently outpace the 1.68% average CD rate.
Despite the benefits, QLACs remain underutilized due to limited awareness and advisor incentives favoring other products. The IRS rule change aims to expand access but has yet to gain widespread adoption.