The QLAC Move That Defers $200,000 of 401(k) RMDs Past Age 85

A 70-year-old retiree with $2 million in a traditional 401(k) has roughly three years before required minimum distributions force the IRS into the conversation. Compound that balance at 5% growth and it lands near $2.32 million at age 73, the year RMDs begin. Using the IRS Uniform Lifetime Table divisor of 26.5, the first mandatory withdrawal comes in at $87,547. That single line item is enough to push a single filer into the 24% federal bracket and likely past the second IRMAA threshold for Medicare premiums.

There is a legal way to shrink that RMD before it ever arrives, and most retirees overlook it.

How the QLAC carve-out works

A Qualified Longevity Annuity Contract is a deferred income annuity purchased inside a 401(k) or IRA. The dollars used to buy it are excluded from the balance the IRS uses to calculate RMDs. Annuity payments must begin no later than age 85, which is where the “longevity” part earns its name: the contract guarantees income at the age when most other plans run thin.

SECURE 2.0 rewrote the rulebook here. The old cap was the lesser of 25% of the account or $145,000. That ceiling is gone. The 2026 limit is $210,000 per person across all eligible retirement accounts, indexed annually for inflation. The IRS confirmed the figure in Notice 2025-67. With core PCE in the 90th percentile of its 12-month range, future adjustments are likely to keep moving up.

The math on a $2.32 million balance

Move $210,000 of the projected $2.32 million into a QLAC at age 70. The RMD calculation at 73 now runs against $2.11 million, not $2.32 million. The new first-year RMD is roughly $79,623. That is about $7,924 less than the unmitigated number, every year, for the twelve years between 73 and 84.

In the 24% federal bracket, that translates to roughly $1,900 in annual tax savings, or about $22,800 cumulatively before the QLAC even starts paying out. State income tax stacks on top.

The IRMAA angle most retirees miss

The bigger lever is often Medicare. The 2026 standard Part B premium is $202.90 per month, but the surcharge schedule kicks in for single filers with modified adjusted gross income above $109,000, and the second tier hits at $137,000. A two-year lookback means a tax return filed at 73 dictates Medicare premiums at 75.

An $87,000 RMD layered on top of Social Security and other income can shove a single filer into the second IRMAA tier, adding several hundred dollars per month to combined Part B and Part D premiums. Trimming the RMD by $7,900 a year will not always avoid a bracket transition, but in households sitting just above a threshold, the QLAC is often the cheapest way to step back under it.

Why the rate environment matters now

Annuity payouts are priced off long-duration Treasuries. The 30-year Treasury yield is near 5% and the 10-year sits at 4.4%, in the 77th percentile of its trailing 12-month range. The Fed funds rate has held near 4% for six months. Insurers price guaranteed income against these benchmarks. A QLAC bought today locks in payouts at rates well above what was available three years ago.

Three actions for a 70-year-old in this seat

1. Run the unmitigated RMD number first. Take the projected balance at 73 and divide by 26.5. If the result puts you over $109,000 in MAGI as a single filer or $218,000 jointly, IRMAA is in play and the QLAC math gets more compelling.
2. Get quotes from at least three A-rated insurers. Payout rates for a 70-year-old deferring 15 years vary by carrier. Married couples should compare single-life against joint-life with a survivor benefit, which trades a lower payout for spousal protection. Confirm the contract caps at the current $210,000 limit and that payouts begin no later than age 85.
3. Coordinate the purchase with a tax projection. If your projected MAGI sits within $10,000 of an IRMAA threshold, the surcharge avoidance alone can pay for a fee-only advisor. Pair the QLAC with a Qualified Charitable Distribution plan at 73 if charitable giving is already in the budget; the QCD offsets the RMD that remains.

The QLAC is fundamentally a longevity hedge that happens to lower the next decade of tax bills as a side effect. For a retiree staring at a seven-figure traditional balance, that combination is rare.