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 MAGI, 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 them carve a slice of the balance out of the RMD calculation entirely, deferring distributions all the way out to age 85.

The scenario is far from hypothetical. On a recent episode of Suze Orman’s podcast, a couple named Janelle and Patrick, both 65, called in asking whether converting traditional IRA dollars into a QLAC made sense as a way to defer RMDs and manage IRMAA brackets when they turn 73. That is exactly the right question at exactly the right age, and the math has only grown more compelling as 2026 has unfolded.

What the 2026 limit actually buys you

SECURE 2.0 eliminated the old 25%-of-balance cap and replaced it with a flat dollar limit indexed for inflation. For 2026, the IRS sets the QLAC premium limit at $210,000 per person, sourced from IRS Notice 2025-67. That means a married couple can move up to $420,000 combined out of their RMD base. 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 our 73-year-old. 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 alone. Repeat 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 bigger 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 provisional income blows past the $218,000 first IRMAA threshold for 2026. That triggers a Part B surcharge on top of the $202.90 standard 2026 premium, plus a Part D surcharge, for both spouses, for two full years because of the two-year lookback. 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 did not merely defer income. It rescued 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 considerably: exceeding the $218,000 threshold by even one dollar triggers the full per-tier surcharge for both spouses.

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 has climbed to approximately 5% as of mid-September 2026, up sharply from roughly 4.49% when the piece ran in early July and well above the 4.75% level it touched on July 31. The FOMC raised its federal funds target range to 3.75%-4.00% at the September 16 meeting, its first hike since July 2023, citing persistent inflation running above the 2% objective. Insurers pricing deferred income contracts are now working with materially higher long-rate assumptions than they were at the start of the year, which strengthens the income case for buyers locking in a QLAC today.

One important caveat stands regardless of the rate backdrop: QLAC payments are fixed in nominal dollars. The 2026 Social Security COLA came in at 2.8%, a reminder 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 suggests. 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 update reflects the FOMC’s September 16, 2026 decision to raise the federal funds target range to 3.75%-4.00%, its first hike since July 2023, and the corresponding rise in the 10-year Treasury yield to approximately 5% in mid-September, well above the 4.66% figure cited in the prior version; the 2026 QLAC premium limit of $210,000 per person, sourced from IRS Notice 2025-67, was also confirmed.

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