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 with the 10-year Treasury yield now above 5% and at its highest level since…
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A little-known IRS-sanctioned move lets retirees shift up to $210,000 from a traditional IRA into a Qualified Longevity Annuity Contract and postpone required minimum distributions on that money until age 85. The 2026 ceiling remains at $210,000, unchanged from 2025, when indexing rules built into SECURE Act 2.0 first lifted the limit above the $200,000 statutory base. Despite that generous ceiling, QLACs remain one of the least-used tools in the entire retirement code. 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, typically 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 meant to 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, and the owner can defer that start date as late as age 85.
The practical effect for a 73-year-old with a sizeable IRA is immediate and concrete. Shifting $210,000 into a QLAC removes that entire balance from the RMD base, shrinking taxable withdrawals for more than a decade. In many cases, that reduction keeps the retiree below the IRMAA thresholds that trigger surcharges on Medicare Part B and Part D premiums, adding a second layer of savings on top of the deferred taxes.
Why the Timing Matters Now
QLAC payout rates move in step with long-term interest rates, and the yield environment is delivering the most generous annuity pricing since the strategy was introduced. The 10-year Treasury yield climbed above 5.35% on October 7, 2026, its highest level since 2002, up sharply from the 4.68% reading when this article was first published in August. That rise translates directly into richer guaranteed income for retirees who lock in now.
The Federal Reserve raised its benchmark rate by 25 basis points at the September 15-16, 2026 meeting, bringing the target range to 3.75%-4.00%, its first increase since 2023. The vote was unanimous, and the updated dot plot pointed to at least one more hike before year-end. The next FOMC meeting is scheduled for October 27-28. Sustained inflation pressure, with PCE projections running at 3.7% for full-year 2026, is keeping longer yields elevated. For retirees purchasing a QLAC in this environment, they are locking in payout rates that reflect where the curve stands today, not where it may settle after additional Fed moves.
Who Actually Has the Balances to Use It
The QLAC ceiling is calibrated for households with meaningful IRA assets, which sharply narrows the eligible audience. According to Fidelity’s Q4 2025 Retirement Analysis, the average Baby Boomer 401(k) balance stood at $270,800 and the average Boomer IRA at $287,600. Participants aged 70 and older had an average 401(k) balance of $273,100. Those figures are pulled upward by high earners, so the median retiree sits well below them.
The $210,000 limit represents a large portion of the typical Boomer’s retirement stash. In practice, QLACs make sense for families in roughly the top quarter of the wealth distribution, where setting aside that amount still leaves a comfortable cushion for unexpected expenses, tax bills, and everyday spending during the 12 or more years before income begins at 85. A married couple can each purchase a separate QLAC from their own IRA, sheltering up to $420,000 combined from the RMD calculation.
The Trade-Off Retirees Weigh
Northwestern Mutual’s 2025 Planning and Progress 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. The 2026 edition of the same study put that figure at 48%, confirming that the fear of outliving one’s money remains widespread across age groups. A QLAC directly addresses that concern by converting a lump sum into guaranteed income for life starting at 85, an age when cognitive decline and sequence-of-returns risk are the hardest to manage.
The cost is liquidity. QLAC premiums are irrevocable. Once the purchase closes, the money is gone from the IRA in any usable sense until income begins. Inflation is the other real concern. Current forecasts cluster the 2027 Social Security COLA at 3.5% to 3.6%, with the official SSA announcement due October 14, and steady consumer price growth means a fixed QLAC payout starting 12 years from now will buy meaningfully less in real terms unless the contract includes a cost-of-living rider.
The Bottom Line
QLACs are not for everyone. The product only makes sense for a narrow 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 lowers the annual tax bill, and a family history or health picture that points toward 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. With the 10-year Treasury yield above 5% and at its highest since 2002, the math behind a QLAC purchase is better right now than at virtually any point in the strategy’s decade-long history. The window will not stay open indefinitely, and the tool remains obscure mostly because the retirement industry has little financial incentive to market a one-time premium product that pays modest commissions compared with managed assets.
Editor’s note: This article has been updated to reflect current market and economic conditions as of early October 2026. The 10-year Treasury yield has been refreshed to above 5.35% (a 24-year high reached on October 7), and the Federal Reserve’s September 16 rate hike to a target range of 3.75%-4.00% has been incorporated. Fidelity retirement balance figures have been updated to Q4 2025 data ($270,800 average Boomer 401k, $287,600 average Boomer IRA), and the 2027 Social Security COLA estimate has been revised from the earlier 3.1% figure to the current forecast range of 3.5%-3.6%, with the official SSA announcement due October 14, 2026.
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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.
