In late 2022, the federal government passed legislation known as the SECURE 2.0 Act. Provisions in this bill have made it easier for people to fund certain annuities that can delay taxes on their retirement funds until the age of 85.
If you are thinking ahead to retirement, you may consider buying an annuity as part of your financial planning strategy. An annuity is a product you purchase from an insurance company that, in return, guarantees you will receive regularly scheduled payouts beginning on a certain date and continuing until your death.
Annuities can serve as a popular source of income for retirees and come in a number of varieties. For example, an immediate annuity may provide you with payments right away, whereas a deferred annuity can be set up to start your payments years into the future, when you anticipate needing that income most.
As a result of SECURE 2.0, one type of deferred annuity – called a qualified longevity annuity contract, or QLAC – has undergone some changes that many are finding particularly valuable.
Read on to learn more about how this option may be helpful.
Similar to other types of annuities, a QLAC is an annuity that you purchase with funds from an IRA, 401(k), or 403(b) account and that guarantees you will receive retirement income on a set schedule. The advantages of QLACs include the following:
SECURE 2.0 changed the funding rules for QLACs as well, which has made them even more attractive to some consumers.
Previously, the maximum dollar amount you could take from an IRA or other qualifying retirement account and put in a QLAC was $125,000 (or 25 percent of the account balance, whichever was less). As of 2023, the 25 percent provision has been removed altogether. The maximum premium also increased to $200,000 (which will be adjusted for inflation in the future).
Retirees, or those nearing retirement, who want to ensure that they will have guaranteed monthly income for life may be strong candidates for a QLAC.
“Longevity” is the key word in the name of this product, as you can defer payments until age 85, along with the taxes on those payments.
In addition to not counting toward the calculation of RMDs, these funds also do not count toward Medicaid eligibility. So, a QLAC would be a useful tool for those who would like to protect their retirement funds from taxes and long-term health care expenses.
An investor could purchase a series of QLACs and “ladder” them so they start paying off in different years. This can help with tax planning, as the income from these annuities is taxed at normal rates.
Annuities are not the only option when it comes to retirement planning. Reach out to us for more information on whether a QLAC fits into your financial plans.
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Estate planning involves various legal instruments, such as wills, trusts, powers of attorney, and healthcare directives. We specialize in estate planning, ensuring that your documents comply with the ever-changing state and federal laws. We can help you navigate intricate legal requirements, minimizing the risk of costly errors and potential disputes.
Every person's financial situation and family dynamics are unique. We will take the time to understand your goals and circumstances, allowing for the creation an estate plan that suits your individual situation.
We can assist you in structuring your estate plan to protect your assets from potential creditors, lawsuits, and taxation. Our experience can also help you employ strategies to minimize tax liabilities.
Probate is the legal process through which a deceased person's assets are distributed. It can be time-consuming and costly. We can help you explore options to minimize or avoid the probate process, allowing your beneficiaries to receive their inheritances more quickly and efficiently.
When estate plans are unclear or disputed, it can lead to conflicts and legal battles. We can help you draft clear and legally sound documents that minimize the chances of disputes among heirs and beneficiaries. In the event that a dispute arises, we can also represent your interests and work toward an amicable resolution.
Estate plans need to be reviewed and updated periodically to reflect changes in your financial situation, family dynamics, and applicable laws. We can provide ongoing support and guidance, ensuring that your estate plan remains current and effective.
Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
Estate planning involves various legal instruments, such as wills, trusts, powers of attorney, and healthcare directives. We specialize in estate planning, ensuring that your documents comply with the ever-changing state and federal laws. We can help you navigate intricate legal requirements, minimizing the risk of costly errors and potential disputes.
Every person's financial situation and family dynamics are unique. We will take the time to understand your goals and circumstances, allowing for the creation an estate plan that suits your individual situation.
We can assist you in structuring your estate plan to protect your assets from potential creditors, lawsuits, and taxation. Our experience can also help you employ strategies to minimize tax liabilities.
Probate is the legal process through which a deceased person's assets are distributed. It can be time-consuming and costly. We can help you explore options to minimize or avoid the probate process, allowing your beneficiaries to receive their inheritances more quickly and efficiently.
When estate plans are unclear or disputed, it can lead to conflicts and legal battles. We can help you draft clear and legally sound documents that minimize the chances of disputes among heirs and beneficiaries. In the event that a dispute arises, we can also represent your interests and work toward an amicable resolution.
Estate plans need to be reviewed and updated periodically to reflect changes in your financial situation, family dynamics, and applicable laws. We can provide ongoing support and guidance, ensuring that your estate plan remains current and effective.
Engaging a law firm for estate planning provides peace of mind, knowing that your affairs are in capable hands. It allows you to focus on enjoying your life without the constant worry of what may happen to your assets and loved ones in the future.
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