Coming off your year-end scramble to make sure your clients’ RMDs were done in time?
If so, start the new year off right - shield up to 25% of your clients' qualified money from RMDs until age 85. Take a look at the new 2020 QLAC limits and call us today at 800-823-4852 to put this powerful tool to work for you!
No time to read? Watch our video overview:
What are QLACs?
A qualifying longevity annuity contract (QLAC) is a special type of deferred income annuity. Starting in 2014, the IRS allowed clients to buy QLACs with qualified (pre-tax) money from an existing 401(k) or IRA.
Not every annuity is a QLAC, however. And not every deferred or longevity annuity is a QLAC, either.
To satisfy the IRS's QLAC requirements, the product must be simple and straightforward: put money in now, pick a deferral period, pick your income and death benefit options (single or joint life, with or without a death benefit), and begin receiving distributions later. You can also buy limited rider options for things like inflation adjustment and return of premium, which increase the overall cost of purchase.
Note that with QLACs, there are no variable interest rates, participation rates, floors, or ceilings (as you’d see with variable, indexed, or buffer annuities).
Take a look at the new 2020 QLAC limits and call us today at 800-823-4852 to put this powerful tool to work for you!
What does a QLAC do for my clients?
QLACs let your clients shift some of the money in their qualified retirement account into an annuity.
Why would they want to do this?
There are two main reasons. First, they can delay required minimum distributions (RMDs) on the money in their QLAC. Without a QLAC, they’d be forced to start taking distributions based on the total value of that retirement account at age 72 (formerly 70 ½) - and paying income tax on those distributions. Many clients don’t need distributions at that age, and don’t want to pay tax on that money yet. With a QLAC, your client won’t have any RMDs on premiums paid until age 85.
The second reason?
In a word, longevity. If your client is worried about outliving their funds, a QLAC solves the problem. It provides guaranteed monthly income as long as they live. Plus, they get the amount they were promised at purchase, no matter what’s happened to the stock market or interest rate in the interim. They're effectively transferring that risk to the insurer.
Take a look at the new 2020 QLAC limits and call us today at 800-823-4852 to put this powerful tool to work for you!
What changed for 2020?
The IRS increased the dollar limit on allowable premiums paid, as of January 1, 2020.
As specified under Code Section 1.401(a)(9)-6 and Regs. Section A-17(b)(2)(i) of the Income Tax Regulations, the IRS increased the lifetime limit from $130,000 to $135,000.
The maximum amount your client can pay into a QLAC is now the lesser of either: (a) $135,000, or (b) 25% of aggregated traditional IRA account values as of the prior December 31, minus premiums paid for other QLACs.
What carriers do you recommend for QLACs?
We recommend products from AIG, Lincoln, and Principal. Click to download up-to-date information about each product below, including producer and consumer guides, sales ideas, fact sheets, and more.
AIG American Pathway® Deferred Income Annuity
Lincoln Deferred Income Solutions Annuity
Principal Deferred Income Annuity
That’s our look at 2020 QLAC limits!
Do you talk to your clients about QLACs? If so, what sells them on a QLAC? Share your strategies in the comments!
