Fidelity Investments announced that Qualified Longevity Annuity Contracts (QLAC) are now available through The Fidelity Insurance Network.
The current QLAC offerings through Fidelity include products from The Principal Financial Group, The Guardian Life Insurance Company and MetLife, Inc.
A QLAC provides retirees with greater flexibility for a portion of the tax-deferred assets they’ve taken a lifetime to accumulate, through the purchase of a deferred income annuity with an income start date after the age of 70 ½ that doesn’t conflict with mandatory Minimum Required Distribution (MRD) rules.
Rather than calculating the amount of an MRD withdrawal on the entire value of all accounts, retirees now can use a portion of a traditional IRA to establish a guaranteed stream of income with a start date as late as age 85.
This can be an ideal solution for those who want the option of setting up an income stream beginning later in life, at a point when other sources of income may be coming to an end or when there’s a greater need to meet essential expenses — including those that tend to rise, such as healthcare costs.
"Today’s longer life spans mean many investors will need enough money to cover essential expenses through a retirement that may last 30 years or more," said Cyrus Taraporevala, president of Fidelity Investments Life Insurance Company.
"Qualified Longevity Annuity Contracts provide a way for investors to create guaranteed cash flow beginning later in life, while also potentially reducing their current taxes."
Although QLAC products are designed for individuals approaching the mandatory MRD age of 70 ½, they can also assist older individuals already taking MRDs. Among the product benefits:
Provides guaranteed lifetime income later in life. Individuals can set the income start date for whenever they want, up until age 85.
Complements Social Security. Like Social Security or pension payments, a QLAC provides a consistent guaranteed income stream.
Helps customize an MRD plan and potentially, tax payments. A QLAC allows an individual the ability to reduce their MRD and potentially, current taxes. The amount invested in a QLAC is excluded from future MRD calculations; meaning taxes aren’t paid until that income starts to be received.
These factors can be quite significant for investors trying to determine whether they’ll have enough funds to last a lifetime. According to a Stanford Study on Longevity, there’s a 50 percent chance of a 65-year-old man living to age 85 — and age 88 for a woman.
At the same time, expenses tend to increase as one ages, to address the necessity of covering the increasing costs of items such as prescription drugs, in-home care, and other necessary health care expenses.