Buying Tips When Purchasing a QLAC

Published September 21, 2017
The answers to the most important questions for when you purchase a QLAC.
  • Know all your available options before buying a QLAC
  • Make sure that a QLAC is right for your financial situation
  • Compare QLACs from different insurance companies with Blueprint Income’s quote tool

When you buy a QLAC from an insurance company using your pre-tax retirement savings it will generate guaranteed income that lasts as long as you do. Because of its special designation, income from QLACs can start later than 70 1/2, reducing the RMDs and associated taxes. It’s a great way to diversify your portfolio, and make sure that all, or most, of your basic retirement expenses will be covered for as long as you live.

purchasing a qlac

Buying one is a long term commitment, so as your licensed fiduciaries, we want to make sure you know the answers to these 7 questions before buying one:

1. Is the policy officially designated as a QLAC?

Annuities must be specifically designated as QLACs to qualify for the special tax deferral. The QLAC designation means that you’re limited to $125,000 contribution or 25% of pre-tax savings.

If you bought a regular qualified (pre-tax) deferred income annuity, it cannot be reclassified as a QLAC.

2. Which insurance companies offer QLACs?

Leading insurance companies like Guardian Life, Lincoln Financial, MassMutual, Mutual of Omaha, New York Life, Pacific Life, and Principal all offer QLACs. When determining which insurance company you should purchase with keep in mind that not all companies sell all products and features in every state!

3. Where can I buy a QLAC?

The easiest way to buy a QLAC is online through our website. We only work with A-and-higher rated carriers, so you know you’ll get a reliable product. At Blueprint Income we have the most selection of insurers and the highest payouts on A rated and better products. Some insurance agents, brokers, and financial advisors will also sell income annuities.

4. What incentive does my broker or insurance agent have to sell this to me?

Not all financial advisors are fiduciaries, meaning they are not legally obligated to keep their clients best interests in mind while making their financial decisions. (That’s not us, we choose to act as a fiduciary). If you are asking a personal agent or advisor for assistance in buying a DIA, make sure to know:

  1. How they’re compensated on the sale;
  2. How they select the products they’re showing you;
  3. How many insurance companies they work with (if they aren’t working with too many, question them! They may not be recommending the perfect product for your needs, but rather the best product for their salaries).

5. How do insurance company credit ratings factor into my choice?

While you might want to go with the company that offers the highest payout, those are the companies that may have lower ratings. The value of a QLAC is undeniably linked to the claims-paying ability of the insurance company. The insurer needs to be around at least as long as you are! Buying from only highly-rated insurers is the way to go. That’s why we only offer you A and higher rated insurers on our platform.

6. Should I buy in chunks or as a subscription over time?

If you’re still years away from retirement, you should consider buying a QLAC as a Personal Pension. You can contribute to a future income over time, as prices improve, and have the ability to diversify across carriers — all done automatically through our platform.

7. Should I buy a QLAC with money from my 401(k)?

It is possible! You can roll your 401(k) funds into an IRA, and then purchase a QLAC. However, to purchase a $125,000 QLAC, you have to have at least $500,000 in your IRA.

You should also talk to your benefits department and ask them for more retirement income options within your 401(k). We can also write a letter to your plan sponsor for you to help you through the process of purchasing a QLAC with your 401(k) savings.

How Can I Purchase a QLAC?

At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes.

purchase a qlac

From there, you’ll get access to our annuity guides and team of specialists to help you analyze your retirement finances and walk you through the application process.

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Nimish Shukla

Nimish Shukla

Financial Planning Professional

Nimish has spoken with thousands of customers about retirement spending. As a CFA Charterholder and licensed fixed annuity producer he values the importance of building an income stream for retirement. In addition to his work at Blueprint Income he is also a regular contributor to Nerdwallet.