The IRS set the 2026 qualified longevity annuity contract limit at $210,000 per person in Notice 2025-67, and that single number has become one of the few levers a retiree can pull to shrink a required minimum distribution before it is even calculated. A QLAC lets a client move up to $210,000 out of a traditional IRA or 401(k) into a deferred income annuity, and the dollars parked there drop out of the RMD base until payments begin, which can be pushed as late as age 85. For a 73-year-old facing a forced withdrawal that inflates modified adjusted gross income, the carve-out does something most retirement-income tools cannot: it lowers the income the government makes you take.
The longevity insurance is the headline. The planning value in 2026 is the MAGI. QLAC RMD deferral pulls taxable income out of the exact years, ages 73 through 84, when the senior bonus deduction phaseout, Medicare surcharges, and Social Security taxation all key off the same MAGI number. Treated as a longevity hedge, a QLAC is a niche product. Treated as a MAGI valve, it is a precision tool for a household sitting just above a threshold.
Key Takeaways
- The 2026 QLAC limit is $210,000 per person, a lifetime cap across all of a client’s retirement accounts, set in IRS Notice 2025-67.
- Income must begin no later than the first of the month after the owner turns 85, and the premium is excluded from the RMD base until payments start.
- The carve-out lowers MAGI during the 73-to-84 window, which can protect the senior bonus deduction, hold down Medicare IRMAA, and reduce the tax on Social Security benefits.
- LIMRA reported record U.S. retail annuity sales of $464.1 billion in 2025, a fourth straight record year, with deferred income annuities at $4.8 billion.
- The trade-offs are real: the money is illiquid, a client who dies before 85 forfeits the premium without a cash-refund rider, and a market-invested balance could outgrow the contract.
What Is a QLAC, and What Did SECURE 2.0 Change?
A QLAC is a deferred income annuity bought inside a qualified account. The client hands an insurer a lump sum from an IRA or 401(k), and in exchange the insurer guarantees a stream of income that starts years later. The federal appeal is mechanical: the premium is removed from the account balance the IRS uses to compute required minimum distributions, so the RMD shrinks.
Before SECURE 2.0, the rules made QLACs awkward. A client could commit only 25% of the account balance or $145,000, whichever was lower, which capped the strategy for exactly the mass-affluent savers who could use it. SECURE 2.0 scrapped the percentage test and set a flat dollar limit, indexed for inflation. That base of $200,000 has climbed to $210,000 for 2026 under Notice 2025-67, the same annual notice that raised the 401(k) deferral to $24,500.
Two guardrails still bind. The premium ceiling is a lifetime figure across every account a client owns, so $210,000 from an IRA does not unlock another $210,000 from a 401(k). And income cannot be deferred past the first of the month following the 85th birthday. A spouse with separate qualifying accounts can fund a separate QLAC up to the same limit, which doubles the household carve-out to $420,000.
How Much RMD Does $210,000 Actually Defer?
Work the numbers on a real balance. Take a client who turns 72 this year with $1.2 million in a traditional IRA. At 73, the Uniform Lifetime Table divisor is 26.5, so the first RMD is $1,200,000 divided by 26.5, or about $45,283 of forced income.
Now carve $210,000 into a QLAC at 72. The RMD base falls to $990,000, and the first RMD becomes $990,000 divided by 26.5, or about $37,358. That is roughly $7,925 of income the client is no longer forced to recognize in year one, and the gap repeats and grows every year the QLAC stays in deferral. Across the dozen years from 73 to 84, the cumulative MAGI kept off the return runs well into six figures.
The income does not vanish. It reappears, larger, when the annuity switches on. Deferring payments from the early 70s to 85 lets the insurer credit more than a decade of mortality and interest, so a $210,000 premium can convert into a five-figure annual lifetime payment that begins exactly when long-term-care and longevity costs tend to peak. The client trades a smaller forced withdrawal now for a guaranteed paycheck later, and controls the timing of both.
Why the QLAC Is Really a MAGI Tool in 2026
Here is the part that does not show up in the product brochure. The ages a QLAC clears of forced income, 73 through 84, are the same years three separate tax mechanics read the client’s MAGI and punish anything above a line.
The first is the new senior bonus deduction. As covered in our breakdown of the $6,000 senior deduction and the phaseout most retirees will trip, the deduction shrinks by 6 cents for every dollar of MAGI above $75,000 single or $150,000 married, and disappears at $175,000 and $250,000. An RMD that lands a single filer at $172,000 leaves only a sliver of the deduction. Shaving $7,925 off that figure with a QLAC can be the difference between keeping the deduction and watching it phase toward zero.
The second is Medicare. The income-related monthly adjustment amount that sets Part B and Part D premiums runs on a two-year lookback, so the MAGI a 73-year-old reports today sets the surcharge at 75. As our guide to the 2026 Medicare IRMAA brackets and Part B premium lays out, crossing a bracket by a single dollar can raise a couple’s combined annual premiums by thousands. A QLAC that holds MAGI one bracket lower pays for part of itself in avoided surcharges.
The third is the Social Security tax torpedo. Once provisional income crosses $32,000 married or $25,000 single, each added dollar of income can make up to 85 cents of benefits taxable. Lowering forced RMD income directly lowers the provisional-income figure that triggers it. A QLAC does not fix any of these problems on its own, but it is one of the only tools that addresses the input all three share: the size of the required distribution.
Who Should Not Buy One?
The strategy is not free, and it is wrong for plenty of clients. The first problem is liquidity. Once $210,000 goes into a QLAC, it is gone as a spendable asset. There is no surrender value to tap for a roof, a medical bill, or a market opportunity. A client without a healthy liquid cushion outside the annuity should not lock up six figures this way.
The second is mortality. The deal assumes the client lives to collect. A buyer who dies at 81 with a plain QLAC and no rider hands the unpaid premium to the insurer, not the heirs. Most carriers now offer a cash-refund or return-of-premium option that pays any unused principal to beneficiaries, but it lowers the income, often meaningfully. A client buying for the longevity hedge should price the refund rider and decide whether the heir protection is worth the smaller paycheck.
The third is opportunity cost. For a wealthy, healthy client who does not need a longevity backstop, $210,000 left in a diversified portfolio could outgrow the annuity over 13 years of deferral. The QLAC wins when the client genuinely fears outliving the money or sits squarely in a MAGI band where the tax savings carry their own return. It loses when neither is true. LIMRA’s record $464.1 billion of 2025 annuity sales, the fourth straight record year, shows how strong the demand for guaranteed income has become, but volume is not a reason for any individual client to buy.
How Does the QLAC Fit the 2026 Retirement-Limit Picture?
The QLAC limit did not move in isolation. It rode in on Notice 2025-67 alongside the rest of the year’s contribution and catch-up changes. Advisors who already reviewed the 2026 retirement limits and the SECURE 2.0 catch-up playbook have the accumulation side handled. The QLAC is the decumulation bookend to that same notice.
The sequencing matters. A QLAC is most powerful when it is funded before RMDs begin, ideally in the late 60s or at 72, because the premium has to leave the RMD base before the first required distribution is calculated to do any good that year. A client who waits until 75 to buy one has already taken two years of larger RMDs that the carve-out could have trimmed. The planning window opens the moment a client has a traditional balance large enough that future RMDs will push MAGI toward a threshold, and it is widest in the few years before age 73.
This is also where the QLAC pairs with Roth conversions rather than competing with them. Conversions shrink the traditional balance permanently; a QLAC defers a slice of what remains. A client can convert during the low-income years of early retirement to reduce the base, then QLAC a final tranche to push the rest of the forced income past 85. Used together, the two tools can keep a household under a MAGI line that either one alone would miss.
Three Questions to Bring to the Next Client Review
The QLAC rewards advisors who model the client’s MAGI a decade forward and spot the years a forced distribution will cross a line. Three questions belong on the agenda before a client reaches 73.
1. Will this client’s RMDs push MAGI across a threshold between 73 and 85, and by how much? Project the first decade of required distributions now. If the answer puts the client into the senior-deduction phaseout, an IRMAA bracket, or higher Social Security taxation, size a QLAC to the overage and fund it before the first RMD year, not after.
2. Does the client have enough liquidity outside the annuity to lock up $210,000 for more than a decade? A QLAC is only appropriate for money the client will not need to touch. Confirm the emergency reserve, the near-term cash-flow plan, and the legacy goals before committing the premium, because the decision cannot be reversed.
3. Is the longevity hedge or the MAGI control the real reason to buy, and does the rider match? If the client is buying mainly to manage taxes, a cash-refund rider protects heirs against an early death at the cost of some income. If the client is buying mainly to insure against living to 95, the plain contract pays more. Name the primary goal first, then choose the rider that fits it.
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