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.
A little-known IRS rule lets certain retirees carve a chunk of their traditional IRA out of the required minimum distribution calculation for over a decade, and the current interest rate environment makes the math more favorable than at any point…
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A little-known IRS-sanctioned move lets retirees withdraw up to $210,000 from a traditional IRA, park it in a Qualified Longevity Annuity Contract, and postpone required minimum distributions on that money until age 85. The 2026 limit was raised from $200,000 in 2025 under indexing rules built into SECURE Act 2.0, and yet QLACs remain one of the least-used tools in the retirement code. Few retirees use them, and the reasons come down to eligibility, liquidity, and awareness.
What a QLAC Actually Does
A QLAC is a deferred income annuity purchased inside a qualified account, usually a traditional IRA. The Treasury created the structure in 2014 to solve a specific problem: retirees who wanted guaranteed income in their 80s were being forced to draw down the exact assets that could fund it, because RMDs kick in at age 73 under current rules. Money placed in a QLAC is carved out of the RMD calculation entirely until payments begin, which the owner can defer up to age 85.
The practical effect for a 73-year-old with a large IRA is straightforward. Shifting $210,000 into a QLAC removes that balance from the RMD base, lowering taxable withdrawals for more than a decade and, in many cases, keeping the retiree under IRMAA thresholds that raise Medicare Part B and Part D premiums.
Why the Timing Matters Now
QLAC payout rates are driven by long-term interest rates, and the yield curve is currently offering the most generous pricing retirees have seen in years. The 10-year Treasury sits at 4.68% as of August 14, 2026, near the top of its 12-month range of 3.97% to 4.75%. That reading ranks in the 96th percentile of the past year, meaning insurers are pricing lifetime income contracts at rates that would have been unavailable as recently as February.
The Federal Reserve has kept its target range parked at 3.75% since December 11, 2025, and core PCE continues to run hot, currently sitting at the 90.9th percentile of its 12‑month range. That sustained inflation pressure keeps pushing yields higher, and those yields determine how much an annuity pays out. For retirees who purchase during this window, they are locking in payout rates that reflect where the curve stands right now, not where it might be a year from now.
Who Actually Has the Balances to Use It
The QLAC ceiling is calibrated for households with meaningful IRA assets, which sharply narrows the audience. Fidelity’s Q3 2025 analysis pegs the average Baby Boomer 401(k) at $267,900 and the average Boomer IRA at $257,002. The average balance for participants aged 70 and up sits at $250,000. Those averages are pulled up by high earners, so the typical retiree is well below them.
That $210,000 ceiling represents nearly the full retirement stash for the typical Boomer household. In practice, QLACs only make sense for families in the top quarter of the wealth distribution, where setting aside that amount still leaves plenty of cash on hand for unexpected expenses, tax bills, and everyday spending during the years leading up to 85.
The Trade-Off Retirees Weigh
Northwestern Mutual’s 2025 study found that 51% of Americans think it is somewhat or very likely they will outlive their savings, and 35% have taken no steps to address that risk. A QLAC directly answers that concern by converting a lump sum into guaranteed income for life starting at 85, an age when cognitive decline and market-sequence risk are hardest to manage.
The cost is liquidity. QLAC premiums are irreversible. The money is gone from the IRA in any usable sense until income begins. Inflation is the other real concern: the 2027 Social Security COLA is tracking at 3.1%, and CPI at 332.8 in July 2026 reflects steady price growth. A fixed QLAC payout starting in 12 years will buy less than the same nominal dollars today, unless the contract includes a cost-of-living rider.
The Bottom Line
QLACs are not for everyone, and the reason almost nobody has heard of them is partly that the product only makes sense for a specific slice of retirees: those with enough IRA assets that a $210,000 carve-out still leaves ample liquidity, high enough marginal tax rates that shrinking RMDs meaningfully reduces the tax bill, and a family history or health picture that suggests longevity.
Trimming the RMD base years before withdrawals begin is the same defusing exercise we walked through in a free guide to the first-year RMD tax bomb. For that group, current Treasury yields make the math better than it has been in the QLAC’s decade of existence. The window will not stay open indefinitely, and the tool remains obscure mostly because the retirement industry has little incentive to market a one-time premium product that pays modest commissions relative to managed assets.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
