Permalink Submitted by Alan - IRA critic on Tue, 2021-12-21 16:03
Total QLACs purchased from TIRA funds are limited to the lesser of 135,000 or 25% of your prior year end balance for all TIRA accounts. This is not an annual limit, rather a total limit. Many people stagger their QLAC purchases over a few years, and can also stagger the payout age, but payout cannot be delayed beyond age 85. Since a QLAC purchase is done by transferring the premium to an IRA annuity, it is not part of the RMD, and the value of the annuity is excluded from your TIRA value in determining your RMD. So basically, if you have a 400k IRA and purchase a 100k QLAC, your RMD is determined by using the remaining balance of 300k. Once the QLAC payouts begin from the IRA annuity, they are treated as the RMD for that contract only. Since RMDs are reduced until as late as 85, QLACs tend to concentrate RMD income over fewer years and those fewer years are more likely to occur after the death of a spouse when the higher single tax rates apply. The 135,000 limit is periodically increased by an inflation factor.
Permalink Submitted by Alan - IRA critic on Tue, 2021-12-21 16:03
Total QLACs purchased from TIRA funds are limited to the lesser of 135,000 or 25% of your prior year end balance for all TIRA accounts. This is not an annual limit, rather a total limit. Many people stagger their QLAC purchases over a few years, and can also stagger the payout age, but payout cannot be delayed beyond age 85. Since a QLAC purchase is done by transferring the premium to an IRA annuity, it is not part of the RMD, and the value of the annuity is excluded from your TIRA value in determining your RMD. So basically, if you have a 400k IRA and purchase a 100k QLAC, your RMD is determined by using the remaining balance of 300k. Once the QLAC payouts begin from the IRA annuity, they are treated as the RMD for that contract only. Since RMDs are reduced until as late as 85, QLACs tend to concentrate RMD income over fewer years and those fewer years are more likely to occur after the death of a spouse when the higher single tax rates apply. The 135,000 limit is periodically increased by an inflation factor.