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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Operations Manager
Jennifer A. McCabe
Client Service Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
July/August 2023
Understanding QLAC
A Qualified Longevity Annuity Contract (QLAC)* is a type of deferred annuity purchased with funds from a qualified retirement plan or individual retirement account. It is designed to provide guaranteed income later in life. A QLAC may help a retiree remain in a lower tax bracket by reducing the balance in a retirement account used to calculate required minimum distributions (RMDs).
How It Works
Secure 2.0 allows an individual to move up to $200,000 from a qualified retirement plan or IRA into a QLAC. The buyer purchases an annuity contract either with a lump sum payment or a series of premiums. Taxes are deferred until payments begin. Payments must start by the annuitant’s 85th birthday, which is also when RMDs kick in. Payments are taxed at regular income tax rates.Three Options
QLAC purchasers generally have three options to choose from.- Payments end when the annuity owner dies.
- Payments stop after the death of the owner and a spouse (joint life QLAC).
- The plan pays a refund to a designated beneficiary.
The second two options will result in lower monthly annuity payments. Buyers can also add cost-of-living adjustments to their contracts.
Laddering QLACs
Purchasing a series of smaller QLACs over several years can help manage the risk that growth will be locked in at a fixed rate. Laddering can provide an advantage if interest rates rise.QLACs may or may not be right for you, so before purchasing a QLAC, check the ratings of the issuing company and consult your financial professional.
*Annuity products are not FDIC-insured, and their guarantees are backed solely by the claims-paying ability of their issuing life insurance company.
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David P. McCabe, Nathaniel D. High, and Nicholas J. Over are Financial Planners with, and offer securities and investment advisory service through LPL Enterprise (LPLE), a Registered Investment Advisor, Member FINRA/SIPC, and an affiliate of LPL Financial.
LPLE and LPL Financial are not affiliated with Centuria Financial Group.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
Centuria Financial Group and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.