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 cap that SECURE 2.0 indexed to inflation. Married couples can each use their own $210,000 allowance.

The reason most retirees have never encountered a QLAC is that they were a niche product until the SECURE 2.0 Act removed the old 25%-of-account limitation and set a flat dollar cap instead. The rule change matters because it makes the strategy usable for the 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 IRA from RMDs.

How the RMD Deferral Actually Works

For a retiree with a $257,000 IRA, moving $210,000 into a QLAC leaves $47,000 subject to RMDs. The smaller base produces a smaller mandatory withdrawal each year, which can keep taxable income under the thresholds that trigger higher Medicare Part B and Part D premiums under IRMAA. This is the mechanism behind the strategy’s appeal for retirees who do not need every dollar of their IRA 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. The 10-year Treasury yield sits at 4.7% as of August 11, 2026, near the top of its 12-month range and in the 98th percentile of readings over the past year. The federal funds rate has held at 3.75% since December 11, 2025, after a series of cuts from 4.5% a year earlier. Elevated long-term yields relative to lower short-term rates generally translate into more attractive QLAC quotes than retirees saw during the low-rate years before 2022.

A different story is told by liquid alternatives. The national average 12-month CD rate is 1.68%, reflecting what mass-market savers actually earn on cash. QLAC payouts guaranteed for life at age 85 are typically expressed as a multiple of the original premium, and current pricing reflects the higher yield environment.

The Tradeoffs

A QLAC removes optionality. The money is illiquid, cannot be withdrawn as a lump sum, and cannot be reversed if health changes. Inflation is the other constraint. CPI has risen to 332.8 as of July 2026 from 323.291 a year earlier, and the 2027 Social Security COLA is tracking at 3.1%. A fixed QLAC payout that begins in twelve years will have less purchasing power than the same dollar amount today unless an inflation rider is added, which lowers the initial payout.

Consumer sentiment reinforces the demand backdrop. The University of Michigan index reads 49.5, in the bottom 10% of historical readings. Retirees worried about outliving their savings are exactly the audience for longevity insurance.

What Retirees Should Know

The QLAC decision comes down to three questions. First, is there IRA money that will not be needed before age 85? Second, does the household have enough non-QLAC assets to cover expenses in the interim? Third, is the quoted payout rate competitive with multiple insurers, given that QLACs are not standardized products? The $210,000 limit resets each January based on inflation, and the strategy only works with pre-tax IRA and 401(k) dollars. Roth accounts are not eligible because they have no RMDs to defer.

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