While a QLAC purchase is not for everyone, here are 8 signs you may need one:
Number 1. You're retiring or about to turn 71 and 1/2. QLAC purchasers typically choose to buy a QLAC near retirement, for example, in their early to late 60s or upon reaching the age of 71 and 1/2. Why at these times? At retirement, many retirees are required to move their assets from their employer-sponsored retirement accounts,for example, 401k or 403B accounts, into an individually managed IRA account.
Next, the most common time to evaluate QLACs is when an IRA owner approaches age 70 and a half. This is the age which IRA account holders will be required to begin making withdrawals from their qualified investment plans. After age 71 and 1/2, retirees must take required minimum distributions (RMDs) or be subject to severe IRS penalties. A QLAC purchase can help reduce RMDs.
Number 2. You are healthy and expect to live a long time. Because the QLAC has no cash value and cannot be undone after purchase, good health and likely longevity are important factors in deciding whether to purchase a QLAC. For people in great health and with a family history of great longevity a QLAC purchase can make a good deal of sense. And QLAC annuity payments, once they begin, continue for life -- even for those who live to be 105!
Number 3. You have retirement assets but need them to last a long time. Most carriers offering QLACs have a $15,000 minimum premium. This translates to a minimum IRA balance of $60,000. The overall premium limit of $135,000 is 25% of $540,000 of IRA assets. If two members of a couple each on separate IRAs, both members may purchase a QLAC, subject of the premium limits previously mentioned. The separate, individual limits are applied to each member of the couple.
Number 4. You have an estate plan in place. But your biggest priority is not being a burden to your children. Most parents want to avoid becoming dependents of their offspring. QLAC lifetime income can help prevent this. While a QLAC is not a tool to build an estate. Return of Premium features can be used to pass on QLAC assets in the event of an untimely death of the beneficiary.
Number 5. You can use some help staying on budget in retirement. A QLAC socks away up to 25% of retirement assets into an instrument that will begin paying monthly payments during later retirement years. This can be a clever way of budgeting for future retirement income needs.
Number 6. You fear the investment climate is uncertain. If market returns are high as they were, for example, during the 1990s, than an IRA owner may be able to apply the 4% rule of thumb, selling off 4% of the IRA assets each year and applying the proceeds to living costs. If, on the other hand, the investment returns climate is more uncertain, as it has been in the last decade, then the IRA owner may want to purchase a QLAC to lock in annuity payments for the future.
Number 7. You have a low tolerance for risk. Some people lay awake at night and worry when there is turbulence in the markets. For these folks, a QLAC maybe a good way to assure future income and current rest.
Number 8. You want to defer taxes. A QLAC offers two potential tax advantages. First, when the IRA withdrawal occurs to pay the premium that IRA distribution is not taxed. Next, the typical QLAC buyer receives a 10 to 20 year deferral of taxation between premium payment and benefit receipt. In most instances, the IRA owner is in a higher tax bracket at the premium purchase date, than he or she will be when the QLAC benefits are paid.
For more information about QLACs including frequently asked questions, articles, and links to authoritative information or links to provider annuity quotes, please call 800-460-4166 or visit QLACguru.com.
Notice: The foregoing video and examples do not portray any one person’s situation. The dramatizations were prepared by the Company to introduce viewers to a new financial product, a Qualified Longevity Annuity Contract. Individual circumstances of a viewer are likely to vary from the examples in the videos. The videos are not tax or legal advice. The financial information, and calculations depicted in these videos are supplied from sources we believe to be reliable. However, we are unable to guarantee their accuracy. These materials are not intended to replace the viewer’s legal, tax and accounting advisors. Any viewer should seek advice from his or her qualified advisors prior to entering into a QLAC purchase. The Company accepts no responsibility for any outcome arising from a QLAC purchase or a failure to make a QLAC purchase. This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state, or local tax penalties.