Tax Saving Sales Idea – QLACs

Tax Saving Sales Idea – QLACs

As the year draws close to its end, now’s an opportune time to start discussing your clients’ IRAs and RMDs that will need to be taken next year based on year-end balances.

A qualified longevity annuity contract (QLAC) can be a great way to pivot from this conversation into one that will save money for your clients and create a sale for you.

With a QLAC, clients can take 25% of their previous year’s IRA balance or $125,000 (whichever is less) and place those monies into a QLAC. Funds within a QLAC are excluded from the RMD calculation and this bucket does not have to be liquidated until age 85 – providing 14-15 years of tax savings on this portion of the IRA and added deferral past the normal 70.5 age where RMDs are required. Once at age 85, the income derived is approximately 20-25% cash flow per year off the initial deposit – and it’s guaranteed for the rest of the client’s life.

Positioning this to hedge for rising health care costs or to supplement a Long-Term Care (LTC) plan that may be in place are a few of the creative ways to earmark this income for the “no go years” of one’s retirement.