The QLAC Move That Defers $200,000 of 401(k) RMDs Past Age 85

A retiree with a traditional 401(k) faces required minimum distributions starting at age 73, calculated using the IRS Uniform Lifetime Table divisor. A large first RMD can push federal income into higher brackets and increase Medicare premiums through IRMAA thresholds. A Qualified Longevity Annuity Contract (QLAC) is a deferred income annuity purchased inside a 401(k) or IRA, and the purchase amount is excluded from the account balance used for RMD calculations. Payments must begin no later than age 85. SECURE 2.0 removed the prior smaller cap and replaced it with a higher, inflation-indexed limit across eligible retirement accounts. Using the example numbers, allocating $210,000 to a QLAC reduces the first RMD and lowers taxable income for multiple years, creating cumulative tax savings before annuity payments begin.

"A Qualified Longevity Annuity Contract is a deferred income annuity purchased inside a 401(k) or IRA. The dollars used to buy it are excluded from the balance the IRS uses to calculate RMDs. Annuity payments must begin no later than age 85, which is where the “longevity” part earns its name: the contract guarantees income at the age when most other plans run thin."

"SECURE 2.0 rewrote the rulebook here. The old cap was the lesser of 25% of the account or $145,000. That ceiling is gone. The 2026 limit is $210,000 per person across all eligible retirement accounts, indexed annually for inflation. The IRS confirmed the figure in Notice 2025-67. With core PCE in the 90th percentile of its 12-month range, future adjustments are likely to keep moving up."

"Using the IRS Uniform Lifetime Table divisor of 26.5, the first mandatory withdrawal comes in at $87,547. That single line item is enough to push a single filer into the 24% federal bracket and likely past the second IRMAA threshold for Medicare premiums."

"Move $210,000 of the projected $2.32 million into a QLAC at age 70. The RMD calculation at 73 now runs against $2.11 million, not $2.32 million. The new first-year RMD is roughly $79,623. That is about $7,924 less than the unmitigated number, every year, for the twelve years between 73 and 84."

Read at 24/7 Wall St.