For 2027 you can put up to $220,000 of individual retirement account (IRA) or 401(k) money into Qualified Longevity Annuity Contracts (QLACs), under Internal Revenue Service (IRS) Notice 2026-66. That is up from $210,000 for 2026.
The limit is per person and covers your whole lifetime. Payments must start by the first day of the month after you turn 85.
Required minimum distributions (RMDs) from a traditional IRA or 401(k) start at age 73 if you were born from 1951 through 1959. They start at 75 if you were born in 1960 or later.
Those forced withdrawals are taxable whether you need the cash or not. They can lift your tax bracket and raise your Medicare premiums. Money you move into a QLAC leaves the RMD math until the payments begin. If the product is new to you, read what a QLAC is first.
Understanding QLAC Contribution Limits Under Current Federal Law
There is no longer a percentage-of-balance cap. Only a dollar limit applies: $210,000 for 2026 and $220,000 for 2027.
That limit is a lifetime amount, and it is indexed for inflation. Premiums you paid in earlier years count against it.
The limit covers all of your IRAs and workplace plans combined. Say you own three traditional IRAs worth $800,000 and a 401(k) worth $300,000. In 2027 your total QLAC premium is still capped once, not once per account.
Each spouse has a separate limit, whatever your filing status. A couple who both own retirement accounts can put in $440,000 combined in 2027.
QLAC lifetime premium limits by tax year
| Tax year | Lifetime QLAC premium limit | Source |
|---|---|---|
| 2027 | $220,000 | IRS Notice 2026-66 |
| 2026 | $210,000 | IRS Notice 2025-67 |
| 2024 and 2025 (history) | $200,000, then $210,000 | IRS notices |
The limit is cumulative. If you paid the full 2026 limit, you can add $10,000 in 2027. It rises only in $10,000 steps.
Eligible Retirement Accounts for QLAC Funding
Traditional IRAs are the most common source, because you control the account.
A 401(k), 403(b) or governmental 457(b) plan also works, but only if the plan offers a QLAC or lets you roll money out to an IRA.
SEP and SIMPLE IRAs follow the traditional IRA rules for RMDs. They can hold a QLAC if the custodian or insurer offers one.
A Roth IRA cannot hold a QLAC. Roth owners have no lifetime RMDs, so there is nothing to reduce.
How QLACs Reduce Your Required Minimum Distributions
Your RMD is last year's December 31 balance divided by a life expectancy factor from the IRS Uniform Lifetime Table. A QLAC premium is left out of that balance.
Take a $500,000 IRA on December 31, 2026. You move $200,000 into a QLAC in 2027. The December 31, 2027 balance used for your 2028 RMD is about $300,000, plus or minus market changes.
At age 73 the factor is 26.5. A $500,000 balance means an $18,868 RMD. The smaller balance means $11,321. That is $7,547 less taxable income in 2028.
The premium does not cut the RMD for the year you buy. That RMD uses the prior year-end balance.
If you were born in 1960 or later, your first RMD comes at 75, when the factor is 24.6.
Calculating Your QLAC Investment Amount
Start by adding up your pre-tax accounts. Someone with $600,000 in a traditional IRA, $200,000 in a 401(k) and $100,000 in a Roth IRA has $800,000 that counts. The Roth does not. The 2027 limit equals about 27.5% of that balance.
Timing decides which RMD shrinks. If you turn 73 in 2027, your first RMD is due by April 1, 2028. It is based on your December 31, 2026 balance. Only a QLAC bought by that date, under the 2026 limit, lowers it.
Have the custodian send the money straight to the insurer. That transfer is not a taxable distribution.
The insurer reports the contract each year on Form 1098-Q. Later, Form 1099-R reports the payments once they start.
Buying Before December 31, 2026 vs. in 2027
A purchase made by December 31, 2026 falls under the 2026 limit. It leaves the premium out of your year-end balance and lowers your 2027 RMD.
A purchase in 2027 gets the higher 2027 limit, but it lowers RMDs only from 2028.
RMD start age by birth year, under the rules for 2026 and 2027:
| Born | RMD start age | Latest QLAC start |
|---|---|---|
| 1951-1959 | 73 | First day of the month after you turn 85 |
| 1960 or later | 75 | Same |
Transfers take time. Ask your custodian and the insurer now how long theirs take, and start early in December at the latest.
Three Real-World QLAC Investment Scenarios
These three cases use real dollar amounts. The payout figures are illustrative quotes, not guarantees.
Scenario One: Maximum QLAC Investment
Margaret was born in 1958 and buys in 2027 at age 69. She still consults part-time, and her pension covers her bills. She pays the 2027 maximum premium, shown in the table below.
At 73 her RMD base is $1,080,000 instead of $1,300,000. Her RMD falls from $49,057 to $40,755. That is $8,302 less taxable income, or about $1,992 a year at the 2027 rate of 24%.
Over 12 years that adds up to roughly $23,900 at 2027 rates, with balances held flat.
The cost is lost growth. At 6% a year for 16 years, her 2027 premium could have grown to about $559,000.
An illustrative 2027 quote pays her about $33,000 a year from age 85. She breaks even at about age 91 and a half. If she dies at 88, she collects $99,000.
| 2027 account details | Amount |
|---|---|
| Age at purchase | 69 |
| Purchase year | 2027 |
| Traditional IRA | $850,000 |
| 401(k) | $450,000 |
| Total eligible | $1,300,000 |
| QLAC premium | $220,000 |
| Income start | Age 85 |
| RMD base at 73 | $1,080,000 |
Scenario Two: Moderate QLAC Investment with Roth Conversion Strategy
Robert is single, was born in 1955 and buys a $100,000 QLAC in 2027 at age 72. His first RMD, figured with the 2027 divisor tables, drops from $24,528 to $20,755. That frees $3,773 a year of 2027 bracket room.
He pairs the QLAC with Roth conversions. The 2027 single brackets tax income at 22% up to $109,125 of taxable income, 24% up to $208,325 and 32% above that, under Rev. Proc. 2026-35.
Say Robert has $80,000 of other taxable income in 2027. He wants to stop at the top of the 24% bracket.
With the QLAC, his income before converting is $100,755 in 2027 terms. He can convert $107,570 a year at 2027 rates. Without it, he can convert only $103,797 in 2027.
The extra $3,773 converts at the 2027 rate of 24% instead of 32%. That saves about $302 a year. The larger gain is a smaller IRA and smaller RMDs later.
Many retirees find big conversions oversold. Paying the 2027 rate of 24% now only helps if your later rate would be higher, so run the numbers on converting before RMDs start first.
Robert picks age 82 for payments, so he can enjoy the money while healthy. An illustrative 2027 quote pays about $12,800 a year.
| 2027 account details | Amount |
|---|---|
| Age at purchase | 72 |
| Purchase year | 2027 |
| Traditional IRA | $650,000 |
| QLAC premium | $100,000 |
| Annual Roth conversion | $107,570 |
| Income start | Age 82 |
| RMD base at 73 | $550,000 |
Scenario Three: Small QLAC Investment to Avoid IRMAA Surcharges
Sandra is single, was born in 1956 and buys a $50,000 QLAC in 2027 at age 71. Her worry is the Medicare income-related monthly adjustment amount (IRMAA).
IRMAA uses modified adjusted gross income (MAGI): adjusted gross income plus tax-exempt interest. Only the taxable part of Social Security counts, up to 85%.
Medicare also looks back two years. Income from 2027 sets 2029 premiums.
The latest official threshold is the 2026 figure of $109,000 for a single filer, from the CMS fact sheet. CMS will announce later thresholds.
In 2026 the first tier adds $81.20 a month to Part B and $14.50 a month to Part D. That is $974.40 plus $174, or $1,148.40 a year.
Here is her first RMD year, measured against the 2026 threshold. Social Security is $35,000, so at most $29,750 is taxable. Her pension pays $52,000. Interest and dividends add $13,500.
Without the QLAC, her RMD is $14,340 and her MAGI is $109,590, measured against the 2026 line. She is over by $590 and pays the full surcharge.
With the QLAC, her RMD is $12,453 and her MAGI is $107,703. By the 2026 threshold, she stays under.
If that holds for the 7 years before payments start at 80, she saves about $8,039 at 2026 rates.
An illustrative 2027 quote pays about $6,800 a year from age 80.
| 2027 account details | Amount |
|---|---|
| Age at purchase | 71 |
| Purchase year | 2027 |
| Traditional IRA | $380,000 |
| QLAC premium | $50,000 |
| Income start | Age 80 |
| RMD base at 73 | $330,000 |
| MAGI with QLAC | $107,703 |
| IRMAA threshold used | $109,000 (2026, single) |
Breaking Down QLAC Payout Structure and Timing
You pick an income start date when you buy. Payments must begin no later than the first day of the month after you turn 85, under Treasury Regulation §1.401(a)(9)-6(q).
Many insurers offer start ages of 75, 80 or 85.
The longer you wait, the bigger the payment. The insurer holds your money longer and expects to pay for fewer years.
As an illustration, a 70-year-old paying a premium near the cap in 2026 might be quoted about $18,000 a year starting at 75, $26,000 at 80 or $35,000 at 85. Quotes change with interest rates and carrier, so get live ones.
A single life annuity stops when you die. A joint and survivor annuity keeps paying your spouse, in full or in part.
Adding a spouse lowers the payment. In the same 2026 illustration, the age-85 quote might drop to $31,000 with a 100% survivor benefit.
Payment Options and Death Benefit Features
The most common death benefit is return of premium. If you die before your payments add up to your premium, your beneficiary gets the difference in a lump sum.
Say you received five payments of $30,000, or $150,000, on the premium from the first example. Your beneficiary gets $50,000. Once your payments match the premium, nothing is left to pay.
That lump sum must be paid by the end of the year after the year you die. It cannot be rolled over, and your beneficiary owes ordinary income tax on it.
Without return of premium, a contract can pay a life annuity to a beneficiary. A spouse who is the sole beneficiary can get up to 100% of your payment.
A non-spouse beneficiary gets a smaller share, set by tables based on the age gap.
Free-Look Cancellation and Divorce Protections
Section 202 of the SECURE 2.0 Act lets a QLAC include a free-look period of up to 90 days. You can cancel in that window.
Divorce is covered too. If you split up after buying but before payments begin, a joint and survivor benefit for your ex-spouse still qualifies when a divorce agreement or court order provides for it.
Tax Implications of QLAC Payments and RMD Calculations
QLAC payments are ordinary income in the year you get them, because the premium was pre-tax money. The insurer reports them on Form 1099-R, like any plan payout.
Once payments begin, the QLAC's own annuity payments satisfy the RMD for that contract. The rest of your IRA keeps its own RMD, and RMDs are taxable the same way.
Most states with an income tax follow the federal treatment. Florida, Texas and Nevada have no income tax.
Some states go easier on retirees. Pennsylvania generally does not tax IRA and plan payouts taken after retirement age. Mississippi exempts qualified retirement income for retirees.
Moving helps too. Federal law (4 U.S.C. §114) stops your former state from taxing retirement income paid to you as a nonresident. So a move before payments begin can cut the state tax on them.
State-Specific Considerations for QLAC Investments
State guaranty associations step in if an insurer fails. Most states cover $250,000 in annuity present value per person per insurer. New York covers double that for annuity contract holders. Look up your state at nolhga.com before you buy.
Nine community property states, including California and Texas, treat retirement money saved during marriage as owned by both spouses. You may need your spouse's written consent to name someone else as beneficiary.
Some states also set their own free-look periods for annuity sales. A longer window gives you more time to cancel without penalty.
Comparing QLACs to Alternative RMD Reduction Strategies
A Roth conversion moves pre-tax money into a Roth IRA, which has no lifetime RMDs. You pay the tax in the year you convert. A QLAC delays the tax until payments start.
Convert $100,000 in 2027 at a 24% rate and you owe about $24,000 right away. Put the same amount into a QLAC in 2027 and you owe nothing now, but every payment is taxed later.
A conversion fits when you expect higher rates later. A QLAC fits when you want lower taxes now and lifetime income. Compare conversions against paying RMDs before you choose.
A qualified charitable distribution (QCD) sends IRA money straight to charity once you are 70½. The limit is $111,000 for 2026 and $114,000 for 2027. A QCD counts toward your RMD and stays out of your income.
Some planners combine all three tools, a mix they call the trifecta. In 2027 a 72-year-old might buy a QLAC, convert $50,000 a year to a Roth and give $25,000 a year through QCDs.
Working past your RMD age (73, or 75 if born 1960 or later) also delays RMDs from your current employer's 401(k), if you own less than 5% of the company. IRAs and old 401(k)s get no such break.
How a QLAC Helps You Keep the $6,000 Senior Deduction
For tax years 2025 through 2028, people 65 and older get an extra $6,000 deduction, or $12,000 for a married couple if both qualify. You claim it on Schedule 1-A.
It phases out once 2027 MAGI passes $75,000 for single filers or $150,000 for joint filers.
Carol is single and turns 73 in 2027. Her pension and taxable Social Security total $62,000. Her IRA matches the earlier example, so her 2027 RMD is $18,868.
Her 2027 MAGI is $80,868, or $5,868 over. At 6 cents per dollar, she loses $352 of the deduction.
Now suppose she had moved the same premium as that example into a QLAC before the end of 2026. Her 2027 RMD is $11,321 and her MAGI is $73,321. She keeps the full deduction.
Mistakes to Avoid When Purchasing a QLAC
A QLAC cannot be undone after the free-look period, so errors are costly.
Mistake One: Investing Too Much and Creating a Liquidity Crisis
Money in a QLAC is locked up. Put half of a $400,000 IRA into one in 2027 and half your savings is out of reach. Many advisors suggest no more than 25% to 30% of savings, whatever the IRS limit.
Mistake Two: Choosing the Wrong Income Start Date
Starting at 75 pays ten years sooner than 85, but each payment may be 40% smaller. Die at 83 with an age-85 start and you collect nothing. Match the date to your health and family history.
Mistake Three: Failing to Coordinate with Spouse's Benefits
A single life contract stops at your death. If your spouse will need that income, price a joint contract and weigh it against their own Social Security and pension.
Mistake Four: Ignoring Insurance Company Ratings
Payments may run 30 years or more. Check the carrier's financial strength ratings before you buy, not just the payout.
Mistake Five: Missing the Year-End Purchase Deadline
Buying on January 15, 2027 leaves the premium in your December 31, 2026 balance. Your 2027 RMD is not reduced. The benefit starts with 2028.
Mistake Six: Forgetting to Name a Beneficiary
With no beneficiary on file, a death benefit may go to your estate and through probate. Fill in the form at purchase and update it after major life events.
Mistake Seven: Misunderstanding the Return of Premium Death Benefit
Return of premium pays only the gap between your premium and the payments you have received. Collect more than you paid in and your heirs get nothing. Buy separate life insurance if you want a set inheritance.
Pros and Cons of Using QLACs for RMD Reduction
These lists sum up what to do and what to avoid.
Dos
Do fit the QLAC into your whole income plan. Someone with a large IRA might put a quarter in a QLAC, three eighths in growth funds, a quarter in bonds and the rest in cash.
Do purchase before your RMD start age (73, or 75 if born 1960 or later). Each earlier year is one more year of smaller RMDs.
Do compare quotes from at least three highly rated insurers. Payouts for the same premium can differ by 8% to 10%.
Do look at inflation riders if you defer for many years. A $25,000 payment rising 3% a year reaches about $45,000 in year 21.
Do time the QLAC with Social Security. Waiting from 62 to 70 raises your benefit about 77% if your full retirement age is 67.
Don'ts
Don't put emergency money in a QLAC. Keep 12 to 24 months of living costs in accounts you can reach.
Don't buy if you have serious health problems. Dying at 78 with an age-80 start means little or nothing comes back.
Don't ignore IRMAA. Crossing a 2026 threshold by even $500 costs about $1,148 a year per person. Medicare checks income from two years earlier.
Don't buy from agents chasing high commissions. Typical pay is 1% to 4% of the premium. Ask how the agent is paid.
Don't forget lost growth. At 7% a year, a 2027 premium near the 2027 cap would earn about $350,000 over 15 years. You may need to live into your 90s to make that back.
QLAC Rules for 401(k) Plans Versus IRAs
A 401(k) falls under the Employee Retirement Income Security Act (ERISA), which puts fiduciary duties on your employer.
Your plan can offer a QLAC only if the plan document allows it. Many older documents do not.
Employers must vet and monitor any insurer they pick. That liability is why many plans skip QLACs.
The fix is a direct rollover to a traditional IRA, where you choose the QLAC yourself. Some plans allow this after 59½ while you still work. A direct rollover is not taxed, though 401(k) plans require RMDs of their own once you reach RMD age.
Married 401(k) owners face one more rule. Many plans must provide a survivor annuity unless your spouse waives it in writing. An IRA lets you pick single life coverage on your own.
Combining QLACs with Qualified Charitable Distributions
A QLAC shrinks the balance your RMD is based on. A QCD then lets you meet the rest of the RMD without adding it to your income.
Take a $700,000 IRA with the QLAC premium from the first example moved out. At 75, the factor of 24.6 on the remaining balance gives a 2027 RMD of $20,325.
If you already plan to give $20,000 to charity in 2027, send it as a QCD. Only $325 of the RMD is left to tax.
This matters most if you do not itemize. The 2027 standard deduction is $16,600 for single filers and $33,200 for joint filers. People 65 and older add $2,100 if single or $1,700 per married spouse in 2027.
Most retirees take those amounts, plus the senior deduction covered above. A normal gift then saves no tax. A QCD does, because it never reaches your income.
The QCD limit is $114,000 for 2027. A QCD can exceed your RMD, but the extra does not carry over.
QCDs can start at 70½. That is before RMDs begin at 73, or at 75 for people born in 1960 or later.
Insurance Company Financial Strength and QLAC Safety
Your payments may not start for 15 years and may last 20 more. The insurer has to be there the whole time.
Rating agencies grade that ability. AM Best rates only insurers, from A++ down to D. S&P and Moody's use similar scales.
A common guideline is to buy only from carriers rated A+ or better by AM Best.
The Comdex score blends the agency ratings into one number from 1 to 100. A score of 90 puts a carrier in the top 10%. Aim for 85 or higher.
If your premium is above your state's guaranty limit, described in the state section above, split it between two highly rated carriers. Check each carrier's current rating before you buy.
Tax Planning Strategies Using QLAC Income Timing
Your start date lets you choose which years carry the QLAC income.
Picture someone who retires at 65. Under the 2027 brackets, before Social Security starts, they may sit in the 12% or 22% bracket. Social Security at 70 may lift them to the 2027 rate of 24%. QLAC payments at 80 may push them to the 2027 rate of 32%.
The low years are the time for Roth conversions. Converting $60,000 a year for eight years at the 2027 rate of 22% costs $105,600 in tax. The same conversions at 32% cost $153,600. That is a $48,000 difference at 2027 rates.
Capital gains work the same way. For 2027, long-term gains are taxed at 0% up to $102,100 of taxable income for joint filers and $51,050 for single filers. Sell winners before QLAC payments begin and more of the gain may fit under that line.
Medicare surcharges are a cliff. The 2026 joint threshold is $218,000, checked against income from two years earlier. If both spouses are on Medicare, both pay. The first tier cost a couple $2,296.80 in 2026.
QLAC Beneficiary Planning and Estate Implications
A QLAC death benefit is income in respect of a decedent. Your beneficiary pays ordinary income tax on it, at their own rate.
That rate matters. At 2027 rates, a $45,000 death benefit costs a child in the top bracket from the timing example above $14,400 in tax. A retired sibling in the 12% bracket pays $5,400.
A spouse gets the best treatment. As sole beneficiary, a spouse can receive a survivor annuity of up to 100% of your payment.
A joint contract and a single contract with a spousal death benefit are not the same. The joint contract pays less at first, but it keeps paying your spouse for life.
Trusts are harder. Death benefits must be paid out quickly, and a trust built to hold assets for years may not fit the rules. See an estate planning attorney before naming a trust.
Inflation Protection Through COLA Riders
A fixed payment loses buying power over 20 or 30 years. A cost-of-living adjustment (COLA) rider raises your payment by a set rate each year.
With a 3% rider, the illustrative payment from the Dos list becomes $25,750 in year two and $26,523 in year three. After 20 years it is $45,153.
The price is a smaller first payment. As an illustration, the flat age-85 quote shown earlier might fall to $22,000 a year with that rider. That is about 37% less at the start.
It takes roughly 10 years for the rising payment to pass the flat one. Live 15 or 20 years and the rider wins. Die within five and it loses.
If Social Security and a pension already rise with prices, a flat QLAC may be enough. Either way, treat a fixed COLA as a partial hedge, not full inflation protection.
Monitoring and Reviewing Your QLAC Strategy
You cannot change a QLAC after you buy it, but you should still check it once a year.
Read the annual statement the insurer sends early each year. It shows the start date and payment amount.
Watch your health. A serious diagnosis at 77 will not undo an age-85 contract, but it may change how fast you spend other accounts.
Update your beneficiary after a divorce, marriage, birth or death. The insurer has a simple form for it.
Track the carrier's rating. A drop from A++ to A+ is not a crisis, but a steady slide is a reason to buy elsewhere next time.
Know your RMD age: 73 if born 1951 through 1959, 75 if born 1960 or later. The QLAC limit is indexed each year, so check whether the 2027 increase leaves you room to add more.
What to do next
- Add up your pre-tax IRA and plan balances as of December 31.
- Find your RMD age from your birth year.
- Get live quotes from three carriers rated A+ or better.
- Ask your custodian how long a direct transfer takes before year-end.
- Keep Form 1098-Q each year with your tax records.
Frequently Asked Questions
Can I buy a QLAC if I already started taking RMDs?
Yes. You can buy at any age before 85, as long as payments start by then. Your RMD age is 73 or 75, depending on your birth year. The purchase lowers RMDs starting the year after you make it.
Do I need spousal consent to buy a QLAC?
It depends. 401(k) plans usually require spousal consent. IRAs generally do not, except in community property states, where consent may apply.
Can I roll my existing annuity into a QLAC?
Only if the annuity already sits inside your IRA or plan. It can generally be exchanged for a QLAC, and its value counts toward the same lifetime limit described above. An annuity you own personally cannot become a QLAC.
What happens if the insurance company goes bankrupt?
Your state guaranty association steps in. Most states cover $250,000 per person per insurer, and New York covers double that. Check nolhga.com for your state's limit.
Can I take a loan from my QLAC?
No. A QLAC has no loans and no cash surrender value. The money stays out of reach until payments begin. The one exception is a free-look cancellation of up to 90 days.
Do QLAC payments count as earned income?
No. They are retirement income. They do not affect the Social Security earnings limit or earn new Social Security credits.
I bought a QLAC in 2026. Can I add more in 2027?
Yes, up to the 2027 limit minus what you already paid. If you paid the full 2026 limit, the 2027 increase is your room. Use a new contract or an added premium if your contract allows it.
What is Form 1098-Q?
It is the form your insurer files with the IRS to report your QLAC. It shows premiums paid, the start date and the fair market value. Keep your copy with your records. You do not file it with your return.
Does a QLAC still make sense if my RMDs start at 75?
Yes, but you get fewer years of smaller RMDs, because payments must still begin by 85. At 75 the factor is 24.6. The full 2027 limit divided by 24.6 cuts your first RMD by about $8,943.
When will the 2027 IRMAA brackets be announced, and which year's income counts?
CMS announces the next year's Part B premium and surcharge tables each fall. The 2027 tables are not out yet. Medicare uses MAGI from two years earlier, so 2027 premiums use 2025 income. A QLAC bought in 2026 first lowers 2027 income, which Medicare looks at for 2029.
Related reading
- Should I Take the RMD at the Beginning of the Year? (w/Examples) + FAQs
- How Are RMDs Taxed? (w/Examples) + FAQs
- What Happens if You Don’t Take the RMD? (w/Examples) + FAQs
- What Is a Qualified Longevity Annuity Contract (QLAC)? (w/Examples) + FAQs
- Can Qualified Charitable Distributions Exceed RMD? (w/Examples) + FAQs
- What Are the Requirements for a Qualified Charitable Distribution? (w/Examples) + FAQs