With rising life expectancies, it is possible that individuals will outlive their traditional retirement savings. A qualified longevity annuity contract (QLAC) provides a potential solution.

什么是质素保证程序?

A QLAC is a fixed deferred annuity, meaning it ensures a continuous stream of income from an agreed-upon start date. This guaranteed income stream is achieved by monthly payments from the QLAC based on the deposit amount in the QLAC, the percentage growth that the QLAC ensures explicitly, and the start date of the payments. Using money from a retirement account, such as a 401(k) or an individual retirement account (IRA), a QLAC can be purchased from insurance and financial services companies. If a taxpayer holds a QLAC, they will need to consider Form 1098-Q with their US tax filing annually.

A QLAC must meet specific requirements set forth in the US tax laws/regulations. 这些要求包括:

• Premiums for the contract must meet certain conditions set forth by the Internal Revenue Service (IRS)
• “The contract provides that distributions under the contract must commence no later than a specified annuity starting date that is no later than the first day of the month after the employee’s 85th birthday.”
• The contract distributions meet specific conditions set forth by Regulation section 1.401(a)(9)-6.
• “The contract does not make available any commutation benefit, 现金退缴权, 或者其他类似的特征.”
• “No benefits are provided under the contract after the death of the employee other than [specifically mentioned] benefits.”
• “当合同签发时, the contract (or a rider or endorsement with respect to that contract) states that the contract is intended to be a QLAC.”
• “The contract is not a variable contract under (Internal Revenue Code) section 817, 索引契约, 或者类似的合同, except to the extent provided by the Commissioner.”

What are the advantages of QLACs?

• QLACs allow for continuous, stable income in the long run. Instead of investing as part of a stock portfolio, one enters a contract that guarantees a monthly payout.
• 有质量保证lac, the required minimum distributions (RMDs) from your other retirement accounts can be reduced. An RMD is the minimum distribution an individual is required to take annually from an Employer-sponsored retirement plan, as defined by the US government.
• Payments in the QLAC are protected from market fluctuations as they are a fixed annual annuity.
• QLACs can be set up as a joint annuity to ensure that not only oneself but also one’s designated beneficiary is provided with continuous income. One advantage of having joint annuitants is that regardless of how long each lives, both individuals are covered under the same conditions. It should be noted, however, that these joint annuities offer lower payments.
• QLACs allow purchasers to defer taxes to be paid, as they are not cashing out their RMD. If the taxpayer lives abroad, this must be discussed with a qualified tax professional, as a specific tax situation’s timing and foreign treatment implications must be addressed.

What are the disadvantages of QLAC?

• The fixed rates of QLACs may result in lower yields than other financial tools, such as mutual funds and stocks, as there is a trade-off between security and the amount of yield. This trade-off could be combatted through a QLAC ladder, which suggests that one should purchase several smaller QLACs over several years if one predicts rate changes in the future.
• Insurance may also fall short even though QLACs insure their products. A solution to this issue could be purchasing QLACs from multiple firms to differentiate risk.

整体, QLACs can be a helpful tool to include in your retirement plan to ensure stable income in the long run, especially if one prioritizes security. However, the QLAC is just one of your options for retirement. You should discuss your retirement options with a qualified financial/pension advisor. To further discuss the tax implications and benefits, please reach out to a member of our team via our 澳门官方老葡京 页面.