Can a QLAC Help You Reduce Your RMDs and Taxes in 2026?
I recently sat with a retired Oil & Gas Executive named Robert. He'd done everything right. Saved diligently for 35 years, built a healthy IRA, lived modestly. But the year he turned age 73, his phone rang with news he wasn't expecting: his required minimum distributions were pushing him squarely into the 24% tax bracket, triggering Medicare surcharges he hadn't budgeted for, and adding stress he absolutely didn't need.
"Bryon," he told me, "I saved this money so I wouldn't have to worry. Now the IRS is deciding when I take it, and it's costing me more than I planned."
That conversation is exactly why I want to talk about Qualified Longevity Annuity Contracts, or QLACs. They're not a magic wand, but for the right person, they are one of the most effective tools I know for reducing required minimum distributions and managing tax exposure in retirement. And in 2026, the rules around QLACs are genuinely favorable.
Here's the short answer: Yes, a QLAC can help reduce your RMDs and your taxes in 2026, if you understand what it does, what it costs you in liquidity, and whether your overall retirement picture makes it a smart fit.
Let's work through the real questions I hear from clients.
"What exactly is a QLAC, and how does it work?"
A QLAC is a special type of deferred income annuity that you purchase inside a traditional IRA or employer retirement plan. Think of it as longevity insurance: you move a chunk of your retirement savings into the QLAC, and in exchange, the insurance company promises to pay you a guaranteed monthly income starting at a future date, as late as age 85.
Here's the part that matters for taxes: the money you allocate to a QLAC is excluded from your account balance when the IRS calculates your required minimum distributions (RMDs). RMDs are the mandatory annual withdrawals the IRS requires you to take from traditional IRAs and most 401(k)s starting at age 73, rising to age 75 in 2033. You pay ordinary income tax on every dollar of those withdrawals. The more you're forced to take out, the more you potentially owe.
By moving money into a QLAC, you shrink the balance the IRS uses to calculate what you must withdraw. Smaller RMDs mean lower taxable income, which means you may stay in a lower bracket, avoid Medicare IRMAA surcharges, and have more control over your tax picture year to year.
"How much can I actually put into a QLAC in 2026?"
The 2026 QLAC contribution limit is $210,000 per person. Thanks to inflation indexing under the SECURE 2.0 Act, that's up from the original $200,000 base. If you're married, you and your spouse can each fund a QLAC, meaning a couple can protect up to $420,000 combined.
And importantly, the old 25%-of-account-balance restriction? Gone. SECURE 2.0 permanently repealed it. So if your IRA is worth $350,000, you're no longer capped at $87,500. You can use the full $210,000 limit without a percentage ceiling getting in the way.
"How does this actually lower my taxes? Walk me through the math."
Let me make this concrete using the 2026 tax brackets for married filing jointly. The 22% bracket runs from $100,801 to $211,400, and the 24% bracket covers $211,401 to $403,550. The 2026 standard deduction for married couples is $32,200.
Imagine you and your spouse have combined Social Security income plus an RMD that's landing you right at the edge of the 24% bracket. If even a portion of that RMD pushes you over, you're paying 24 cents on every additional dollar instead of 22. That gap compounds over many years of retirement.
Now imagine you had moved $210,000 into a QLAC a few years earlier. That $210,000 is no longer counted in your IRA balance for RMD purposes. Your RMD shrinks. Your taxable income drops. You may stay firmly in the 22% bracket, and you avoid the IRMAA surcharges that kick in once your modified adjusted gross income crosses certain thresholds. The savings are real and they repeat every year until your QLAC income kicks in.
I'll also note something that has meaningfully changed the planning landscape: the One Big Beautiful Bill Act, signed in 2025, permanently extended the Tax Cuts and Jobs Act provisions. These brackets are not sunsetting. That means when you're projecting what your tax situation will look like when your QLAC starts paying out at age 85, you can plan with confidence rather than guessing whether rates will spike. That's a significant shift in how I approach long-range planning conversations with clients.
"Is tying up $210,000 really worth it?"
This is the question I push every client to sit with honestly, and it deserves a real answer.
A QLAC is illiquid. Once the money goes in, you generally can't touch it until the income start date you selected, which can be as late as age 85. If a major expense comes up, that money is off the table. So the first question isn't "is a QLAC a good idea?" The first question is "do I have enough liquid assets outside of this contract to cover my needs from now until 85?"
For Robert, the engineer I mentioned earlier, the answer was yes. He had a pension, Social Security, and a taxable brokerage account covering his day-to-day. His IRA was generating RMDs he genuinely didn't need and couldn't efficiently spend. Moving $210,000 into a QLAC made sense for him because the liquidity he was "giving up" was money he wasn't relying on anyway.
I had another client, a retired school administrator, who was intrigued by QLACs until we looked at her full picture. Her IRA was her primary liquid asset, and she had no other significant savings. Locking up $210,000 would have left her exposed if her roof needed replacing or her car gave out. We passed on the QLAC and focused on Roth conversions instead.
The tool has to fit the situation. As a CFP with over 30 years of experience, I'll tell you that the clients I've seen benefit most from QLACs are those with multiple income sources who can afford to defer a portion of their IRA balance without feeling financially squeezed in the years before the contract pays out.
"Why are so many people suddenly interested in annuities and guaranteed income?"
The data tells you something important about where retiree anxiety is right now.
According to LIMRA (March 2026), total U.S. annuity sales hit a record $464.1 billion in 2025. And that momentum carried into 2026, with $107.4 billion in annuity sales in just the first quarter, marking the 10th consecutive quarter above $100 billion (LIMRA / Annuity.org, June 2026).
People are seeking guarantees. And I think one statistic explains why more than any other: 67% of Americans say they're more afraid of running out of money in retirement than they are of dying (Allianz Life 2026 Annual Retirement Study, May 2026). That number stops me every time I see it, because it reflects something I hear in my office constantly.
Here's a counterpoint worth sitting with: the median retirement savings for Americans aged 55 to 64 is only $185,000 (Federal Reserve Survey of Consumer Finances, reported May 2026). For those folks, a $210,000 QLAC isn't realistic. But for clients who have saved more, the fear of outliving their money is legitimate, and a QLAC directly addresses it by guaranteeing income no matter how long you live.
"What about Roth accounts? Could I just convert and skip all this?"
Roth conversions and QLACs aren't mutually exclusive. I often use them together.
Under SECURE 2.0, Roth 401(k)s no longer require RMDs at all. And unlike Roth IRAs, Roth 401(k)s have no income limits on contributions, which makes them accessible to high earners who can't contribute directly to a Roth IRA. Converting traditional IRA funds to Roth over time reduces the future RMD-generating balance, while a QLAC can shelter a lump sum and provide guaranteed income late in life.
For some clients, the most efficient strategy is to use a QLAC to reduce RMDs in the near term while doing strategic Roth conversions to shrink the traditional IRA balance over years. It's not one-or-the-other thinking.
"So, is a QLAC right for me?"
It might be, if you:
- Have a traditional IRA or eligible 401(k) large enough to allocate $210,000 without limiting your liquidity
- Are facing or approaching RMDs that push you into a higher tax bracket or trigger IRMAA surcharges
- Have other income sources that will cover your expenses between now and age 85
- Want guaranteed income you cannot outlive in your later years
It probably isn't the right move if your IRA is your primary liquid asset, if you're in a low tax bracket where RMDs aren't creating pressure, or if you have significant health concerns that make deferring income to 85 unlikely to pay off.
Robert, by the way, funded his QLAC two years ago. He told me recently that for the first time in years, he doesn't dread tax season. That's not a bad return on a planning conversation.
If you're curious whether a QLAC fits your situation, I'd be glad to walk through your numbers. You can reach me through the contact page or schedule a time directly on my calendar. There's no obligation, just a real conversation about what makes sense for you.
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Cetera Advisors LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice.