• Welcome to Clayton Biltmore Financial

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Office Address

7733 Forsyth Blvd, Suite 1100 St. Louis, MO 63105

Phone Number

866-457-4642

Email Address

Info@Cayton-Biltmore.com

Minimizing Required Minimum Distributions (RMDs)

Reducing your RMDs

You might want to consider a qualified longevity annuity contract (QLAC) which is a type of annuity that allows you to get more value out of your
retirement savings by continuing to delay owing taxes.

What is a QLAC?

A Qualified Longevity Annuity Contract (QLAC) is a type of deferred income annuity funded with pre-tax dollars from qualified retirement accounts such as a traditional IRA, 401(k) and 403(b). Unlike immediate annuities, QLACs defer payouts to a future date, typically between your mid-70s and age 85. The “qualified” designation allows the premium to be excluded from RMD calculations,
lowering taxable withdrawals in the early years of retirement

 

How QLACs Work
  1. Funding: You transfer funds from a qualified retirement account to purchase the QLAC, up to the IRS limit of $210,000 per person or $420,000 per couple.
  2. Deferral Period: The money grows tax-deferred inside the contract until payouts begin.
  3. Payouts: Once payments start, you receive guaranteed monthly or periodic income for life.
  4. RMD Treatment: The QLAC premium is removed from the account balance used to calculate RMDs, reducing early retirement
    taxable income. Payments are taxed as ordinary income when received.
    The retirement funds you use to purchase a QLAC do not count toward your required minimum distributions and in using them to purchase a QLAC, you’ll be able to defer taking distributions from those funds until age 85 (vs. 73).
  5. Taxes– QLACs are purchased with pre-tax dollars that you’ve put into retirement savings, so once you withdraw money from the QLAC, you’ll need to pay income taxes on it. However, a QLAC can be an efficient tax planning strategy to help you lower your tax burden on your retirement savings.
  6. Death Benefit – QLACs typically have the option to either receive no death benefit or receive a return of premium, which means your beneficiaries would get back the amount you contributed to the QLAC less any distributions.

Talk to us to see if a QLAC is right for you