Retirees Can Move $210,000 From an IRA Into a QLAC and Delay RMDs on That Money Until 85. Almost Nobody Has Heard of It.

The Qualified Longevity Annuity Contract, or QLAC, is one of the least discussed tools in the U.S. retirement code. It allows a retiree to move a portion of an IRA into a deferred income annuity and exclude that amount from the required minimum distribution calculation until age 85. For 2026, the maximum amount that can be moved is $210,000 per person, up from the original $200,000 base that SECURE 2.0 indexed to inflation. Married couples can each use their own $210,000 allowance, for a combined household shield of $420,000.

The reason most retirees have never encountered a QLAC is that they were a niche product until the SECURE 2.0 Act eliminated the old 25%-of-account limitation and replaced it with a flat dollar cap. That rule change is what makes the strategy accessible for a typical retiree with a mid-sized IRA. According to Fidelity’s Q3 2025 Retirement Analysis, the average Baby Boomer IRA balance sits at $257,002, meaning the $210,000 QLAC limit can shelter the majority of a typical boomer’s retirement account from RMDs.

How the RMD Deferral Actually Works

Age 73 is when RMDs begin under current law, and the required percentage climbs each year as the account owner ages. Money moved into a QLAC is carved out of that calculation entirely. Income from the annuity can be deferred until any month up to age 85, at which point payouts begin and are taxed as ordinary income. For a retiree who buys a QLAC at 73 and elects the maximum deferral, the practical effect is roughly twelve years of deferred taxation on the sheltered portion.

For a retiree with a $257,000 IRA, moving $210,000 into a QLAC leaves just $47,000 subject to RMDs. That smaller base produces a much lower mandatory withdrawal each year, which can keep taxable income below the thresholds that trigger higher Medicare Part B and Part D premiums under IRMAA. That IRMAA benefit is the core of the strategy’s appeal for retirees who do not need every IRA dollar to cover current expenses.

Why the Current Rate Environment Matters

Annuity payout rates are tied to the bond yields that insurers earn on their reserves, so the interest rate backdrop matters more for a QLAC purchase than most retirees realize. The 10-year Treasury yield stood near 4.97% as of late September 2026, up from roughly 4.7% in early August, reflecting a bond market that has repriced sharply higher since mid-year. That move accelerated after the Federal Reserve raised its benchmark rate by 25 basis points on September 16, 2026, bringing the federal funds target range to 3.75%–4.00%. The hike was the Fed’s first since 2023, and policymakers signaled at least one more increase may follow before year-end.

The shift in Fed direction matters for QLAC shoppers because elevated long-term yields translate into more attractive annuity quotes. Insurers pricing deferred income products pass higher investment returns forward as larger payouts. Retirees who buy a QLAC today are locking in a rate structure that compares favorably to the low-rate environment that prevailed before 2022, when the same premium would have generated a meaningfully smaller guaranteed income stream.

The Tradeoffs

A QLAC removes optionality. The premium is illiquid once committed, cannot be reclaimed as a lump sum, and cannot be reversed if health deteriorates. Inflation is the other constraint worth quantifying. The Consumer Price Index for All Urban Consumers reached 334.980 in July 2026, a 3.4% increase from a year earlier, according to the Bureau of Labor Statistics. Looking ahead, the 2027 Social Security COLA is now tracking in the 3.5% to 3.6% range, based on projections from AARP and the Senior Citizens League following the August CPI release. A fixed QLAC payout that begins twelve years from now will carry less purchasing power than today’s equivalent dollar amount unless the contract includes an inflation rider, which reduces the initial payout.

Consumer sentiment reinforces the demand backdrop for longevity insurance. The University of Michigan consumer sentiment index fell to 47.8 in September 2026, its second consecutive monthly decline and a reading below the first percentile of the index’s entire history. Retirees who fear outliving their savings are precisely the audience a QLAC is designed to serve.

What Retirees Should Know

The QLAC decision comes down to three questions. First, is there IRA money the household will not need before age 85? Second, are non-QLAC assets sufficient to cover expenses in the interim years? Third, is the quoted payout rate competitive across multiple insurers, given that QLACs are not standardized products and pricing varies widely? The $210,000 limit resets each January based on inflation adjustments, confirmed by IRS Notice 2025-67, and the strategy works only with pre-tax IRA and 401(k) dollars. Roth accounts are ineligible because they carry no RMDs to defer.

Editor’s note: This article has been updated to reflect the Federal Reserve’s September 16, 2026 rate hike to a target range of 3.75%–4.00%, the 10-year Treasury yield rising to approximately 4.97% as of late September 2026, the Bureau of Labor Statistics’ July 2026 CPI-U reading of 334.980 (up 3.4% year over year), the University of Michigan consumer sentiment index declining to 47.8 in September 2026, and updated 2027 Social Security COLA estimates of 3.5%–3.6% from AARP and the Senior Citizens League.

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