Help Minimize the Impact of RMDs

Help Minimize the Impact of RMDs

Who would’ve ever guessed that one day we’d be saying, “I may actually live longer than expected”? It’s true – we’re actually living longer! According to data compiled by the Social Security Administration:

  • A man reaching age 65 today can expect to live, on average, until age 84.3
  • A woman turning age 65 today can expect to live, on average, until age 86.6*

Those are just averages – the SSA also reports about one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.

Since we can expect to live longer, then we need to help our clients’ retirement funds live longer as well. QLACs (Qualified Longevity Annuity Contracts) are one new option to help ensure your clients don’t outlive their income. These long-term investments designed for retirement income planning are a contract between your client and an insurance company. Though annuities are not new, QLACs were only introduced to the market last year. 

On July 1, 2014, the U.S. Department of Treasury and IRS issued the final rules regarding deferred income annuities (DIAs), thereby deeming longevity annuities that meet specific requirements QLACs. Like all annuities, QLACs help retirees plan for their retirement by using a portion of their savings to purchase a guaranteed income stream. This income stream is backed by the financial strength and claims-paying ability of the issuing insurance company. With QLACs, however, this income stream begins much later in life. 

By purchasing a QLAC, retirees can reduce their RMDs (required minimum distributions) by up to 25 percent (a maximum of $125,000) and not have to take distribution on those funds until later (up through age 85). This is not ideal for all clients, but it's a good opportunity for clients who aren't using their RMDs for necessary income. 

Carriers had to create specialty DIAs to meet QLAC guidelines. They started rolling out products at the end of 2014 - more are likely coming soon. 

The Bottom Line: As your clients approach retirement and their life expectancies increase, QLACs can help them hedge the risk of outliving their retirement income. Contact your Ash Brokerage annuity team for information explaining this new offering. 

 *March 1, 2015: "SSA Calculators: Life Expectancy,"

For financial professional use only. Not for use with general public. #E1503-591 Rev. 3/15