At the end of the year senior citizens that are 70 ½ or older are going to have to start taking required minimum distributions (RMDs) out of their IRAs. One relatively new method that people are using to hold down their RMDs involves a qualified longevity annuity contract (QLAC). This new method approved by the U.S. Treasury in 2014 lets people exclude the portion of their IRA used to buy the QLAC from the funds used to calculate RMDs in future years. One big issue that senior citizens need to contend with involves managing their longevity risk. If an annuity holder is concerned about passing away before the start date of the QLAC contract they could purchase it with a “return-of-premium (ROP) rider to guarantee that the annuity holder or his/her beneficiary will get at least as much from the contract as was invested in the contract.” Those that are interested in learning more about QLACs or any other retirement planning option should speak with a professional estate planner.
See Dr. Don Taylor, Lowing longevity risk with a QLAC, Bankrate, November 12, 2015.
