From 24/7 Wall St. · Jake FitzGerald · · 2m
Hide $210K in Your IRA From the IRS Until Age 85
A little-known tax strategy lets retirees shrink required withdrawals by locking money into an annuity, but the trade-offs are steep.
In brief
A little-known tax strategy lets retirees shrink required withdrawals by locking money into an annuity, but the trade-offs are steep. QLACs can meaningfully reduce taxable RMDs for wealthy retirees with longevity concerns, but they eliminate liquidity and lock in ordinary income taxes later. Originally reported by…
What a QLAC actually is
A QLAC is a deferred income annuity you buy inside a traditional IRA or 401(k). You pay a lump sum today and receive fixed monthly checks starting as late as age 85.
The IRS stops counting that money
The IRS excludes your QLAC premium from the balance used to calculate required minimum distributions. Up to $210,000 per person can be sheltered this way under 2026 rules.
How the math shifts in practice
A 73-year-old with $1 million in an IRA normally owes about $37,736 in RMDs. Moving $210,000 into a QLAC cuts that to roughly $29,811, freeing up taxable income for 12 years.
You lose liquidity forever
Once you pay the premium, you cannot withdraw the money, take a loan against it, or access it for emergencies. Most QLACs offer no cash surrender value.
Taxes are deferred, not eliminated
Every dollar the QLAC pays out is taxed as ordinary income, just like a regular IRA distribution. You are trading smaller RMDs now for larger guaranteed taxable checks later.
Interest rates matter a lot
Higher rates mean better QLAC payouts. With the 10-year Treasury at 5 percent in September 2026, rates are much higher than during the low-rate era, strengthening the case.
Who should actually consider this
QLACs suit healthy retirees with family longevity, large pre-tax IRAs, other liquid assets, and real longevity concerns. They are poor fits for those with short life expectancy or thin reserves.
Get multiple quotes first
Compare offers from highly rated insurers, confirm start dates and riders, and run the numbers against a Roth conversion. This decision does not unwind, so consult a fee-only fiduciary.
“This is the kind of decision worth pricing with a fee-only fiduciary or CPA before the check clears, because it does not unwind.”
What to remember
QLACs can meaningfully reduce taxable RMDs for wealthy retirees with longevity concerns, but they eliminate liquidity and lock in ordinary income taxes later.
