Deferring Distributions By Using a QLAC
The story
Jim has more than $500,000 in IRA assets that he doesn’t need right now but is hoping to save for future emergencies. His family has a history of longevity.
The problem
Jim does not have a need for the required minimum distribtuions (RMDs) that the government will make him take over next few years. While he realizes he will have to take RMDs later he would like to defer them for as long as possible.
Client profile
- Bill is age 70 and retired
- He has children and grandchildren he is close to and has already planned for them
- He is concerned about outliving his income
How it Works
A qualified longevity annuity contract (QLAC) is an annuity purchased as an IRA. Because income isn’t needed now, Jim would like to delay receiving Income from RMDs (and taxes) until later in retirement.
QLACs are the only product available which does not require RMDs to start at age 72 and can delay income to age 85.
Why a QLAC?
A QLAC is a strategy where, by delaying the need to take RMDs at 72, a person can save more for later in retirement. By putting a portion of his IRA assets into a QLAC, Jim can alleviate his worries about outliving his income, preserving more of his earnings for when he needs them.
The Result
- Max amount Jim (age 70) can put in QLAC: $125,000 (25% of IRA assets, not to exceed $135,000)
- Income starting at age 85: $25,500 per year
- Estimated Amount of RMDs delayed from age 72 to age 85: $71,318
Mike McGlothlin, CFP®, CLU®, ChFC®, LUTCF®, NSSA® is a bestselling author, industry-renowned speaker and expert in growth strategies for financial advisors.
Today as the Executive Vice President of Retirement for Ash Brokerage, he leads 65 direct reports who have grown a business line 300% in the last six years and is now one of the largest wholesaling teams in the Brokerage General Agency space.
As a professional guide he can help any financial advisor looking to create exponential revenue growth, to find new clients and better streamline their operations by incorporating his simple methodologies and proven models.
