Are you old enough to remember 'Diamonds Are a Girl's Best Friend?' The song is from the 1953 musical starring Marilyn Monroe, "Gentlemen Prefer Blondes."
"The French are glad to Die For Love. They Delight in fighting duels, but I prefer a man who lives and gives expensive Jewels! A kiss on the hand may be quite Continental. But Diamonds, are a Girl's Best Friend!"
Here is why these lyrics are relevant even today more than 50 years later. The average lifespan in America has been growing and women are living much longer than men. A 2014 longevity study predicts a sixty-year-old woman has a 32% chance of surviving to age 90. If a woman celebrates an 80th birthday, there is a 42% chance of living to 90. A husband's survival rates are much lower than those of his like-aged wife.
A woman's chances of outliving her husband at age 60 are a whopping 57%!
How to pay for all those golden years? In retirement a QLAC may be -- to borrow from the song -- a girl's best friend. Here are a few basics a QLAC stands for Qualified Longevity Annuity Contract. Available only since 2014, a QLAC provides a pension-like stream of annuity payments in the later years of retirement. A woman may buy a QLAC today and lock in lifetime monthly income starting at a future date of her choosing.
A QLAC allows her defer benefit payments until age 75, 80 or 85 or anywhere in between. The longer she waits for the payout the higher the QLAC's benefit payment. An IRA owner may buy a QLAC with IRA assets without incurring a tax penalty.
She can use the lesser of 25% of IRA assets or $125,000 out of her qualified retirement account to buy a QLAC. For 2018 and after the maximum QLAC limit increases from $125,000 to $130,000. The IRS calculates this limit per individual taxpayer. If both a woman and her spouse have IRAs each may buy a QLAC. Until benefit payments start, no required minimum distributions are payable on the QLAC assets. So, taxes on whatever money she put into her QLAC are deferred. Once the annuity starts QLAC benefits will continue for as long as she lives benefits and will continue while she's alive, even if she lives to age 100 or older.
R-E-S-P-E-C-T, respect might mean Q-L-A-C. High net-worth individuals Do not often worry about running out of assets in retirement. They can use the so-called 4% rule to liquidate their portfolios. With smaller portfolios, for example, IRA assets between $100,000 and $1,000,000 that 4% rule does not make sense. A Qualified Longevity Annuity Contract is a good alternative strategy. A QLAC can provide a reliable stream of payments throughout even the longest retirement. Indeed, a QLAC can outlast diamonds, gold, and stocks, and bonds, and, probably, your husband!
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.