The QLAC Strategy That Lets a 70 Year Old With $2 Million Defer $200,000 of RMDs Until Age 85

A Qualified Longevity Annuity Contract (QLAC) can move a capped amount from a traditional 401(k) or IRA so that amount is excluded from the year-end balance used to compute required minimum distributions. SECURE 2.0 increased the QLAC cap to a flat dollar limit indexed annually, with a 2026 per-person ceiling of $210,000. The QLAC does not pay until a chosen income start age between 70.5 and 85. Using a $2 million account, moving $210,000 reduces the RMD base to $1.79 million, lowering the first-year RMD by about $7,925 at age 73. The reduction grows over time as the deferred balance compounds, potentially exceeding $100,000 and sometimes approaching $200,000. Lower taxable income can also help avoid Medicare premium surcharges tied to modified adjusted gross income thresholds.

"SECURE 2.0 lifted the QLAC cap to a flat dollar limit indexed annually. For 2026, the per-person ceiling is $210,000, up from the 2025 figure. Money moved from a traditional 401(k) or IRA into a QLAC is excluded from the year-end balance the IRS uses to compute RMDs. The contract itself does not pay anything until the income start date the buyer chooses, which can be any age from 70.5 up to 85."

"Apply that to the $2 million account. Move $210,000 into a QLAC and the RMD base drops to $1.79 million. Using the IRS Uniform Lifetime Table divisor of 26.5 at age 73, the first RMD math looks like this: RMD on the full $2 million: roughly $75,472 RMD on $1.79 million after the QLAC carve-out: roughly $67,547 First-year reduction in forced ordinary income: about $7,925"

"That gap widens every year the deferred balance compounds. Over the 12 years between 73 and 85, the cumulative RMD reduction on a steadily growing account typically clears $100,000, and on a strong-return path can approach the $200,000 figure that gives this strategy its appeal."

"The RMD reduction does more than defer $7,925 of ordinary income. For retirees near an IRMAA threshold, it is the difference between a normal Medicare premium and a surcharge. The first 2026 IRMAA tier kicks in above $109,000 of modified adjusted gross income for single fil"

Read at 24/7 Wall St.