A $1.5 Million 401(k) at 73 Can Defer $200,000 in RMDs Past Age 85. Here’s How.

A 73-year-old couple sitting on a $1.5 million traditional 401(k) is about to take their first required minimum distribution. They do not need the cash. They need the optionality. That check lands on top of Social Security, pushes them through the first IRMAA bracket at $218,000 of joint modified adjusted gross income, and triggers a Medicare surcharge that follows them for two full years. The qualified longevity annuity contract is the one IRS-blessed tool that lets a retiree carve a slice of the account balance out of the RMD calculation entirely, deferring distributions all the way to age 85.

This scenario plays out more often than planners expect. On a recent episode of Suze Orman’s podcast, a couple named Janelle and Patrick, both 65, called in to ask whether moving traditional IRA dollars into a QLAC made sense for deferring RMDs and staying under IRMAA thresholds when they reach 73. That is exactly the right question at exactly the right age. With long-duration Treasury yields well above where they spent most of the past decade, the math behind this strategy has grown considerably more compelling.

What the 2026 limit actually buys you

SECURE 2.0 eliminated the old 25%-of-balance cap and replaced it with a flat dollar ceiling indexed for inflation. For 2026, the IRS sets the QLAC premium limit at $210,000 per person, per IRS Notice 2025-67. A married couple can move up to $420,000 combined out of their RMD base, with each spouse drawing from their own accounts. Every dollar placed into a QLAC drops out of the year-end account balance the IRS uses to compute required distributions.

Run the numbers on the 73-year-old in this scenario. The Uniform Lifetime Table divisor at age 73 is 26.5, so a $1.5 million balance produces a first-year RMD of about $56,600. Shift $210,000 into a QLAC and the RMD base shrinks to $1.29 million, pushing the new RMD down to roughly $48,700, a reduction of about $7,900 in year one. Carry that arithmetic through age 84, and cumulative deferred distributions clear $200,000, all of it still compounding inside the tax wrapper rather than landing on a 1040.

The IRMAA trap this actually defuses

The more consequential story is the tax cascade the strategy avoids. Add a $56,600 RMD to a couple drawing $60,000 in Social Security and a $40,000 pension, and joint income clears the $218,000 first IRMAA threshold for 2026. Crossing that line triggers an $81.20 monthly Part B surcharge per spouse, on top of the $202.90 standard 2026 premium, plus a $14.50 monthly Part D surcharge per spouse. That penalty runs two full years because Medicare uses a two-year income lookback based on 2024 tax returns. A couple in the 22% federal bracket who simultaneously trip 85% Social Security taxation and the first IRMAA tier face an effective marginal rate approaching 40 cents on every additional dollar.

Trim the RMD by $7,900 and that same household stays under the threshold. The QLAC does not merely defer taxable income. It rescues two full years of Medicare premiums from a surcharge tied to a single year’s income decision. The cliff structure of IRMAA sharpens this point: exceeding the $218,000 threshold by even one dollar triggers the full per-tier surcharge for both spouses for the full calendar year.

Why the rate backdrop matters right now

QLAC payouts are priced against long-duration Treasuries, and the rate environment for buyers has shifted substantially since this article was first published. The 10-year yield stood at approximately 5% in mid-September 2026, following the FOMC’s rate hike, and continued climbing to 5.36% on October 7, a level not seen since 2002. It then pulled back sharply, falling through the mid-October range of around 5.2% and retreating further to roughly 4.86% to 4.94% by late October and early November as a flight-to-safety rally took hold after equity market turbulence.

That pullback deserves context for anyone evaluating a QLAC purchase today. Yields remain elevated relative to anything seen between 2009 and 2022, when the 10-year spent most of that stretch below 3%. Insurers pricing deferred income contracts are still working with long-rate assumptions that are materially higher than they faced at the start of the decade, which supports the income case for buyers. But the brief early-October window above 5% has closed, and quotes obtained today will reflect the current 4.8% to 4.9% range rather than the peak.

The rate backdrop for the Fed itself also shifted in October. The FOMC voted 12-0 on September 16 to raise the federal funds rate target range to 3.75%-4.00%, its first hike since 2023, citing persistent inflation above the 2% objective. The September dot plot showed the median FOMC member projecting one additional 25-basis-point hike before year-end, which would bring the target to approximately 4.1%. At its October meeting, however, the Fed held rates steady at 3.75%-4.00%, citing more-balanced near-term risks. The November meeting outcome remains the key variable for anyone evaluating the rate environment.

One caveat stands regardless of the rate level: QLAC payments are fixed in nominal dollars. The 2026 Social Security COLA came in at 2.8%, and the Social Security Administration announced a 3.6% COLA for 2027 on October 14, its largest increase since 2023. Those numbers are reminders that purchasing power erosion is real over a 12-year deferral period. A $210,000 QLAC purchased today delivers a smaller real income stream at 85 than the nominal quote implies. Use it as longevity insurance first and as an inflation hedge not at all.

What to do this quarter

1. Pull last year’s tax return and project this year’s MAGI with the full RMD included. If joint MAGI crosses $218,000 (or $109,000 single), the IRMAA surcharge alone often justifies the QLAC carve-out.
2. Request at least three QLAC quotes with income starting at 85, not 80 or 82. The longest deferral produces the largest monthly payment and the maximum RMD reduction during the interim years. Compare A.M. Best ratings before chasing the highest payout.
3. Coordinate the purchase with a partial Roth conversion in the same tax year. The $7,900 RMD reduction creates room to convert an equivalent amount at the same marginal rate, shrinking the future RMD base twice over in a single calendar year.

Editor’s note: This pass added the Part D first-tier IRMAA surcharge of $14.50 per spouse per month to the IRMAA section, updated the rate section to reflect the 10-year Treasury yield’s further pullback from its October 7 peak of 5.36% to roughly 4.86% to 4.94% by late October and early November, and added the October FOMC decision to hold the federal funds rate steady at 3.75%-4.00% rather than hike as the September dot plot projected. The 2027 Social Security COLA announcement of 3.6% on October 14, 2026, the largest increase since 2023, was also incorporated into the purchasing-power caveat.

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