Who Is The Best Candidate For A QLAC Annuity Contract?

A QLAC, or Qualified Longevity Annuity Contract, is an annuity you purchase with a lump sum. The income from the annuity begins at a future date that you specify and continues for as long as you live.

QLACs can be an attractive option for people looking to insure themselves against the risk of outliving their retirement savings. But not everyone is suitable for a QLAC.

Now let’s examine who is the best candidate for a QLAC annuity.

Who Is The Best Candidate For A Qualified Longevity Annuity Contract (QLAC)?

A Qualified Longevity Annuity Contract (QLAC) is a deferred income annuity that provides you with a secure income in your retirement years. For example, if you put $200,000 into a QLAC, payments won’t start until you reach a certain age, ensuring a stable income for your entire lifetime.

The ideal candidate for a QLAC should exhibit the following characteristics:

• You are planning for a longer life expectancy and want to avoid outliving your savings.
• Nearing retirement age and seeking to reduce your RMD taxable income
• You’re aiming to keep more of your retirement plan intact and tax-deferred.
• You prefer delaying Required Minimum Distributions (RMDs) to savor tax qualification benefits.
• You can invest 50% of your retirement portfolio or $200,000, whichever is lesser, and still live comfortably during retirement.
• Retirees with $500,000 or more in qualified retirement accounts.

 

Who Are QLACs Best For?

QLACs, or Qualified Longevity Annuity Contracts, might be your golden ticket if you’re one of those who:

• Has a family history of living late into retirement. Yup, longevity runs in your genes, and you need a financial plan to match.
• Even as you cruise into your late retirement years, you are in tip-top health. You won’t bow out anytime soon, so you’ll need that financial buffer.
• Shivers at the thought of risk. You want security, and these products offer just that – safety with minimal risk.

Remember, QLACs are deferred income investments that provide guaranteed lifetime income for those who might outlive their savings. So, if these traits sound like you, a QLAC might be worth considering.

How To Determine If A QLAC Is Right For You

Step 1: Research the types of QLACs available

The first step in determining if a QLAC is right for you involves researching the different types and providers of QLACs available as of 2023.

Here’s how to approach this:

• Conduct thorough online research on QLACs, focusing on their features, suitability, and the offering companies.
• Also, check financial strength ratings and customer satisfaction indices from A.M. Best, S&P Global Financial Strength Ratings, the Comdex rating system, and NAIC.
• Remember, only opt for annuities specifically labeled as QLACs.

Pro tip: Engage a financial advisor at Integrity Now Insurance Brokers to assist in reviewing and understanding the choices available.

Step 2: Determine your financial needs for retirement

Planning for retirement considers the financial landscape when you stop working to ensure a comfortable livelihood. Take these key steps to determine your financial needs:

• Start using a retirement planner like Empower.
• Consider hiring an independent fixed annuity expert.
• Review each annuity type and decide which retirement plans work best.

Step 3: Calculate the amount you’d need to withdraw from your QLAC each year

As of 2023, the most a retiree can invest in a QLAC is $200,000 or 50% of their qualified retirement account. As your fixed annuity expert, we will conduct a suitability questionnaire on day one.

This will answer how much guaranteed income is required to feel comfortable during retirement. A QLAC is designed to extend your RMDs up to age 85 to enable you to reduce your taxable income.

Our clients will typically buy two types of annuities when nearing 65. First, we will establish a Fixed Index Annuity providing a lifetime income guarantee with minimum guarantees and show the potential upside growth. Once the minimum guaranteed monthly income amount is identified, we establish the QLAC based on our client’s retirement needs.

As an example. Client A may need $7,500 of fixed monthly income. They have $1,100,000 in a 401K and traditional IRA. If we put 900,000 into a Fixed Index Annuity, this investment guarantees a payout of $9,800 a month for life. We can allocate the remaining $200,000 into a QLAC.

However, If client A only has $800,000 and the fixed index annuity needs $700,000 to produce a guaranteed income of $7,500, we could only fund $100,000 into a QLAC annuity.

Step 4: Analyze your current investment performance against various investment goals

1. Start with an overview of your current investments – look at your portfolio and get familiar with each investment’s recent performance.
2. Analyze your investment goals – what are you trying to achieve? This could be retirement savings, a down payment on a house, or starting a business.
3. Compare your current performance against these goals – are you on track to reach them, or is there a shortfall?

Step 5: Consider if you’ll be able to take full withdrawals when needed

• Start by assessing your retirement timeline. If nearing retirement, a Qualified Longevity Annuity Contract (QLAC) can safeguard money from market volatility.
• Calculate your retired life’s expenses.
• Evaluate your health and life expectancy. Remember, fixed annuities provide guaranteed lifelong payouts.
• If instant liquidity is vital, consider stashing away $50,000 in cash for emergencies.
• Consult a tax professional to understand Required Minimum Distributions (RMDs) and how they might affect your IRA withdrawals.

Step 6: Evaluate the benefits package offered by the QLAC company

It is vital to understand who you are giving your retirement saving to. This is why Integrity Now Insurance Brokers only work with B++Rated annuity companies.

Our licensed annuity professionals follow these simple rules:

• Start by evaluating the stability of the QLAC company. Check for financial strength ratings from A.M. Best, S&P Global, and Comdex.
• Scrutinize their customer service through the NAIC complaint score index.
• Consider their QLAC’s specific features like the income start date, payout options, death benefits, fees, surrender penalties, and inflation protections.

Step 7: Ask questions during an in-person consultation with a registered agent

1. Ask the annuity agent to clarify a QLAC and how it fits into retirement planning.
2. Inquire about the potential downsides of opting for a QLAC.
3. Discuss your specific financial situation and retirement goals. Ask the agent’s opinion on whether a QLAC would benefit you.
4. Ask about the fees associated with a QLAC.
5. Confirm with the agent about the minimum and maximum contribution limits of a QLAC.

Expert tip: Maintain an open conversation with your fixed annuity agent. They’re there as a resource, so utilize them by asking questions about QLACs, even if you think they might be basic or obvious.

QLAC Providers

Carrier	Product	Deposits	Issue Ages	QLAC Options
AIG (American General Life) A.M. Best A S&P A+	American Pathway DIA	$20,000 min, $200k max Death Benefit prior to income start date: Life/Joint Life=ROP	18-83 Age Nearest	– Life – Joint Life – Cash Refund – Start Date Adjustment feature – Commutation Withdrawal Benefit – COLA increase 1-5%
Integrity A.M. Best A- S&P A-	Income Source Select	$10,000 min, $200k max	31-83	– Life Only – Life with a Cash Refund – COLA increase 1-5% – Flex income start date feature
Lincoln National A.M. Best A+ S&P AA-	Deferred Income Solutions	$1,000 min, $200k max Life Only: None All other opts: ROP	18-80 Age Nearest	– Life with a Cash Refund – Accelerated Payment Feature – Cost of Living increase 1-4% – Flex income start date feature – Flexible premium version avail
New York Life A.M. Best A++ S&P AA+	Guaranteed Future Income	$5,000 min, $200k max Life Only: None	31-80 QLAC Actual Age	– Life – Joint and Survivor – Joint Life – COLA increase 1%-3% compound – Flex income start date feature
Principal Life A.M. Best A+ S&P A+	Deferred Income Annuity	$10,000 min, $200k max Death Benefit prior to income start date is ROP	Life Only 0-82 Actual Age	– Life – Joint and Survivor – Life and Joint Life – Flex income start date feature
Symetra A.M. Best A S&P A	Freedom Income Annuity	$10,000 min, $200k max	0-80 Age Nearest	– Life – Life with a Period Certain – Period Certain Only – Life and Joint Life – Joint and Survivor – COLA increase .10%-6.5% – Commutation to Beneficiary Option
United of Omaha A.M. Best A+ S&P A+	Deferred Income Protector	$5,000 min $200k max Death Benefit Life Only: None All other opts: ROP	40-75 Age Nearest Flex Prem min $2k	– Life and Joint Life – Flex Income Start Date

Frequently Asked Questions

Who Should Buy A QLAC?

A Qualified Longevity Annuity Contract (QLAC) is essentially a contract that offers guaranteed steady income during retirement. For instance, if you do not want to deal with stock market fluctuation risks but prefer a secure income flow.

Ideal QLAC candidate:

• You prefer stability over market fluctuation risk
• You don’t mind investing a part of your IRA or retirement account into a QLAC
• You want a hands-off approach to your retirement income
• You’re comfortable with the idea of your annuity being a contract rather than an investment
• You’re looking for tax efficiency in your retirement plan.

Not all annuities qualify as QLACs, and exploring multiple options is advisable before deciding.

Who Should Not Buy A QLAC?

QLACs, or Qualified Longevity Annuity Contracts, may deter specific individuals due to their lack of flexibility. If instant availability of your funds is a priority, perhaps a QLAC isn’t for you.

• You may regret a QLAC investment if a financial emergency arises and you cannot access your funds.
• If longevity isn’t on your side, investing might not make sense. Those with serious health conditions or a shorter lifespan in their family might not reap the QLAC benefits.
• Lastly, QLAC’s potential low yields compared to higher-yielding securities present another reason to reconsider. These factors might suggest alternate investment routes over a QLAC.

Do QLACs Provide Guaranteed Lifetime Income?

Yes. QLACs (Qualified Longevity Annuity Contracts) provide a guaranteed lifetime income. You pay a lump sum to an insurance company, which then guarantees a monthly payout starting at a future date set by you.

Depending on the contract, this income continues for as long as you or your spouse lives.

What is a longevity annuity?

A “longevity annuity” is a deferred annuity you buy with a lump sum of cash.

What’s the earliest age I can purchase a QLAC?

You can purchase a Qualified Longevity Annuity Contract (QLAC) as early as 18. However, we recommend waiting until turning 60 to 65 years of age.

Why choose a QLAC?

A Qualified Longevity Annuity Contract (QLAC) is an investment that provides you with a guaranteed income later in life.

Five main advantages of choosing a QLAC include:

1. Long-term income security, which acts as a safety net for late retirement and long-term care costs
2. RMD deferral, which allows you to postpone withdrawals from your retirement savings until you’re 85
3. Principal protection, guarding your future income against market fluctuations
4. Inclusion of your spouse in the annuity, guaranteeing them a payment for as long as either of you lives
5. Enhancement of your overall financial security for late retirement and beyond.

 

How Can I Determine if I Am a Good Candidate for a QLAC Annuity?

If you are considering a QLAC annuity, it is essential to compare and research the best annuity rates available. Consult with a financial advisor to determine if you meet the criteria as a good candidate for a QLAC annuity and to explore the potential benefits for your retirement planning.

We Are Your QLAC Annuity Agents

Integrity Now Insurance Brokers are your trusted experts regarding QLAC annuities. With years of experience in the insurance industry, we understand the complexities and nuances of annuities, particularly the Qualified Longevity Annuity Contracts (QLAC).

Our team of knowledgeable and dedicated professionals is committed to providing you with top-notch service and guidance, ensuring that you make informed decisions about your financial future.

We take the time to assess your needs and goals, tailoring our recommendations to meet your specific requirements. As QLAC annuity agents, we are well-versed in the intricacies of these retirement income vehicles and can explain the benefits and drawbacks clearly and concisely.

We believe in a transparent and honest approach, putting your best interests first and helping you secure a stable and worry-free retirement.

Regarding QLAC annuities, choose Integrity Now Insurance Brokers as your trusted partners and annuity experts.