Retirement income planning using QLAC for age 85

Major concern for retirees is the running out of money during retirement. You have accumulated a portfolio for the last three decades while working now you have to make that money last with pulling income for the next 25 years or is it 30 years or 35 years?

Here lies the problem. How many years will I live so I can figure out how much to pull from my portfolio every year without running out of money. Yet without knowing the time period, it’s impossible to know if you should be spending more or less and if the investments in the portfolio can be more conservatively invested or be somewhat more aggressive in your stock allocations.


QLAC, also known as a longevity annuity, provides guaranteed lifetime income later in life. The income start age is chosen by the owner at deposit which must begin by age 85.

The benefit of using QLAC in your income planning is to solve for the unknown time period problem. As an example a 65-year-old couple that purchases a QLAC with income starting at age 85 will cover all of their inflated income needs after age 85. Now the couple’s retirement income question just got simpler. They will now only need to solve for the income for the next twenty years (age 85), which is defined, as the QLAC will provide inflation adjusted income for life after age 85.


The 65-year-old couple has $1,000,000 and wants to spend $40,000 per year from their retirement portfolio for the rest of their lives and increase annual payment 3% per year for purchasing power in the future. $40,000 per year increase for inflation every year will be $72,244.45 per year at age 85 or in 20 years. Today the couple can purchase a QLAC also called a Longevity annuity for their future $72,244 per year, or $6,020 per month, beginning at age 85 for a one time deposit today of $260,000. The QLAC or Longevity annuity purchase will leave the remaining $740,000 of the retirement portfolio available to cover the next 20 years from age 65 to 85. Since QLAC has a limit of $125,000 deposit the amount can be split among both of their IRAs and or non-qualified longevity annuity. All have the same deposit and income payout terms.

The couples “problem” just got a whole lot easier to figure out now, instead of trying to invest $1,000,000 for a $40,000 per year inflation-adjusted retirement income for an unknown time period. The couple can invest $740,000 for a $40,000 per year inflation-adjusted income for exactly 20 years, secure in knowing that all payments beyond that point will be covered by the QLACs and backed by the longevity insurance company guaranteed lifetime income payments. The QLACs will also allow the couple to take more risk in their portfolio knowing the guaranteed lifetime income payments are not to far off to cover the unknown retirement income time horizon.

For a no annual fee QLAC and no free quote see where we compare all QLAC approved companies to find you the best income amount. 


When you turn 65 and apply for Medicare benefits from the government the choice seems to be straight forward and simple to complete. Your decisions at this time of your retirement can derail your income later in retirement. Choosing which Medicare plan to take at what monthly cost seems straight forward. Plan A & B. Supplemental Medicare plans purchased thru insurance companies help will the coverage gaps. What if I told you that if you make a certain amount of income after age 65 that your Medicare Plan could cost you more than your neighbor down the street. That is called a Medicare surcharge. What if I told you that a 55 year old couple today would not receive a social security deposit into their bank account every month because the cost of Medicare plans and external expenses would “eat” all the social security income deposits up every month. Would these statements derail your income plan in retirement?

According to a Nationwide study, 76% of retirees surveyed underestimated the external costs in retirement for medical expenses or could not calculate their costs. Medicare only covers about 62% of expenses associated with health care services.
The two factors that contribute to health care expenses rising and taking over your social security income deposits are high inflationary costs and Medicare surcharges to help offset Medicare costs for lower income retirees in the Medicare system.

COLA or cost of living adjustment to social security income has averaged around 2 percent a year for the last ten years with three periods of no increase to COLA. Combine that low social security income increase to the average 8% Medicare increase and you can see why in the longer period that health care expenses such as Medicare premium payments will consume the vast majority of social security income later in life. With well over half of American retirees relying on social security income as their only source of income in retirement this should be a concern going forward.

Medicare plan surcharges are based on a MAGI or Modified adjusted gross income schedule for single and couples. MAGI is the total of your household’s adjusted gross income plus any tax-exempt interest income. Examples of tax-exempt income would be life insurance loans, non-qualified annuity income, Roth IRA proceeds and longevity insurance or annuity income.

medicare surcharges

The Medicare surcharges for a single taxpayer start at $85,000 in yearly MAGI. Surcharge for Medicare premiums for couples start at $170,000. At both of these levels the surcharge is 37% increase than standard Medicare plan cost. These surcharges can increase all the way up to 204%. The key concern is that the surcharge income schedule range is NOT pegged to inflation; so as our earning power increase the schedule stays the same and more retirees will be effected.
For younger people not yet in their sixties these two cost increases will consume more social security income as most retirees count on social security checks to live on. Check out and for help on your Medicare benefits.

Fidelity Managed RMD Payout Funds Miss the Mark

Fidelity today announced the Simplicity RMD Funds. These managed-payout funds, which generally aim to provide investors with regular monthly payments (which aren’t guaranteed like annuity payments) have been around for ten years. Managed-payout funds in total represent less than 1% of the available target-date mutual funds available on the market. “Retirees often struggle to understand when, which assets, what amount and how to take the annually mandated withdrawal from their tax-deferred retirement accounts,” said Ken Hevert, senior vice president of Retirement at Fidelity Investments. “If not done correctly, investors may experience a 50% tax penalty on any amount not withdrawn by the annual deadline.”

These RMD payout funds are at the core a target date mutual funds which have a specific accumulation year in the future to better gage your investment risk. An example would be a later dated target date funds, such as the Fidelity Freedom 2020 fund. This funds has 60% percent equity and 40% fixed bonds investment exposure in the fund. It is built for accumulation of assets with a built in asset allocation model.

Screen Shot 2017-06-14 at 10.35.02 AM

The spin on Fidelity’s new RMD Simplicity payout funds are the same as a target dated fund except it has a built in RMD distribution linked to it with another fidelity withdrawal form required. You would still receive a notification from any other IRA investment that a RMD distribution is required if you are older than age 70 1/2 yrs old. So the RMD marketing spin is just that a way to capture assets at Fidelity from IRA holders. Look into a QLAC (Qualifying Longevity Annuity Contract) which the US Treasury has “blessed” as a way to totally defer RMD income payments until age 85 of 25% of your IRA balance or $125,000, whichever is the lesser of.

QLAC income is greater than the income from an investment, such as Simplicity RMD Funds from Fidelity, gaining 5% each year for 25 straight years. The below chart illustrates taking IRA portfolio RMD vs investing that $125,000 IRA into a QLAC and receiving guaranteed lifetime income payments at either 75, 80 or 85 yrs old. At age 90 you would have received $125,031 more income via a QLAC at age 80 than taking the RMD from a portfolio investment. See below for details:

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MetLife becomes Brighthouse Financial for some policies

On March 6, 2017 MetLife’s consumer retail life insurance and annuity business was separated into a separate company called Brighthouse Financial. Currently, MetLife’s U.S. Retail is part of a Systemically Important Financial Institution (Sifi) labeled by the US Government. This means companies will have a higher capital requirements that could put it at a significant competitive disadvantage to other annuity and life insurance companies. Even though MetLife is appealing their SIFI designation in court and do not believe any part of MetLife is systemic, this risk of increased capital requirements contributed to our decision to pursue the separation of the business. As a separate company, called Brighthouse Financial the U.S. retail business will benefit from the flexibility of capital reserves set out by SIFI and help product innovation in the future. At the same time, the separation will bring significant benefits to MetLife as they focus even more intently on large group business in the U.S. and international operations.

• $240 Billion in total assets
• 2.8 million annuity & Life contracts
• $120 billion in investments
• “A” Rating by A.M. Best (as of Oct 2016)

Frequently Asked Questions:

Is my policy still secure?
Yes. Each of the two separated companies are closely regulated, well capitalized, and capable of meeting all policyholder obligations.

As a policyholder, do I have to do anything as a result of the U.S. Retail separation? Is there any cost to me?
• No action is required on your part at this time and there is no additional cost to you as part of this change.   

Does my policy remain with MetLife or has it been transitioned to Brighthouse Financial? Am I considered a MetLife or Brighthouse Financial client?

The following policies remain with MetLife:
• Group policies
• Auto & Home policies
• Individual life insurance policies and annuity contracts that were issued by:
• Metropolitan Life Insurance Company
• Metropolitan Tower Life Insurance Company
• General American Life Insurance Company
Policies issued by the following companies have been transitioned to Brighthouse Financial:
• First MetLife Investors Insurance Company (most retail policies)
• MetLife Insurance Company USA
• New England Life Insurance Company

QLAC Buying Tips

Comparing longevity annuity rates or QLAC income rates should be an easy task to complete. Following the tips in this article to navigate you thru the QLAC process with maximize your purchasing power.

Tip #1  Your Advisor doesn’t want you to buy a QLAC

Call your financial advisor and tell her to get you the top three companies paying the highest income amount given your initial deposit amount.  Problem is does your financial advisor want to transfer your manageable billable assets out to another company even If it is in your best interest?  Second the commission is very low and usually one time.  This is a loss for your financial advisor at your increased retirement income gain from the purchase of a QLAC.  These  factors are a common behind the scenes issue that your advisor might have.


Tip #2  Research the companies online

There are less than 10 longevity annuity or QLAC companies offering consumer annuities.  It should be easy to get access to longevity annuity consumer brochures and information for each company.


Tip # 3  Read the fine print for limitations

Investment minimums are as low as $5,000 and not the stated $25,000 initial     investment usually told to you by financial advisors.  This difference in minimums is “justification”  from the low commission and sometimes heavy paperwork an advisor must complete in order to establish a QLAC  or longevity annuity. Remember $125,000 is the maximum the Treasury Department will allow into a QLAC or Qualifying Longevity Annuity Contract from their summer 2014 rule.


Tip # 4 Flexible deposits or stacking is available.

Once your initial deposit is made most longevity annuities allow for monthly deposits as low a $100 per month.  Each additional deposit “stacks” income on top of your initial quoted monthly income rate.  As the example below shows an initial deposit of $125,000 at age 75 with annual deposit of $9,000 per year until year 7 gives him a total income of $4,182.18 per month.

Stacking QLAC deposits

Look closely in the second year he deposited $9,000 which gave him an additional $209.90 in monthly income at age 85, which was his initial income start date chosen at application.  Each year his deposits stack on each other to give him a higher income amount.  Did you notice that each year he makes the same deposit amount, $9,000 in this example, but his monthly income each year is lower. This is because his deferral period is lower each year and his longevity credits are smaller each year for a lower income “stack” each year.QLAC is a longevity annuity also know as a Qualifying Longevity Annuity Contract.  Usually a one time deposit for a guarantee lifetime income at a future date chosen by the applicant. Options include inflation income adjustments, death benefits of deposit and joint annuitant for income.

QLAC income produce what is know in the retirement planning world as retirement alpha.  Alpha is defined as having the most power in a group, dominate compared to others. For a no annual fee QLAC and free quote see where we compare all QLAC approved companies to find you the highest income amount. Retirement Happiness 🙂

Annuity Income at age 80: Index vs QLAC


What is the better guaranteed income product for a retiree age 70 wanting guaranteed lifetime income at age 80; Index annuity or QLAC? 

Most popular choice has been the index annuity with almost $50 billion of deposits in 2015.  Allianz Life is the #1 carrier in indexed annuities, with a market share around 25 percent. American Equity Companies held on as the #2 carrier in the market; Security Benefit Life, Great American Insurance Group, and Athene USA followed-up in sales, rounding-out the top five. Allianz Life’s Allianz 222 Annuity was the #1 selling indexed annuity for the second consecutive quarter in 2015.  These index annuities have an optional GLWB (Guarantee Lifetime Withdrawal Benefit) income rider usually for up to 10 years where income is guaranteed for an annually fee above 1%. Fewer and fewer index annuities have income riders that guarantee an income payment for life as the current low interest rate environment is to blame.

The product that got the “blessing” from the Treasury Department in 2014 is the longevity annuity also know as a QLAC (Qualifying Longevity Annuity Contract).  This federally approved “blessing” allowed the RMD from IRA deposits to defer required minimum distributions until age 85.  Usually a one-time deposit for a guarantee lifetime income at a future date chosen by the policy holder. QLAC options include inflation income adjustments of 1% -4% along with CPI-U, death benefits of deposit and joint annuitant for income.


  1. Index Annuity with Income Rider (6.25% ”roll up rate” annually for 10 year, 6.8% withdrawal rate at age 80)  10 years at age 80  lifetime income is $12,842 annually

  2. QLAC or Longevity annuity 10 years at age 80  lifetime income is $15,950 annually

Read More…

New York Life QLAC Review

When shopping for a QLAC, there are options to be aware of. These include the company and legal limit that is calculated to purchase a QLAC. But they should also include a review of the annuity carrier through which you are purchasing your Qualifying Longevity Annuity Contract or QLAC. This is because you will want the carrier to be strong and stable from a financial standpoint – and to know that the insurance carrier will  continue to pay your income payments on a regular basis.

New York Life’s Company History

The company was founded in 1845 in New York City at 58 Wall Street.  New York Life Insurance Company is the largest mutual life insurance company in the United States. A Mutual Life Insurance company is owned entirely by its life and annuity policyholders.  Profits are redistributed back to policyholders in the form of dividends.

The main products that are offered by New York Life Insurance Company are life insurance and retirement annuities. The products are offered through licensed “in-house” captive financial advisors throughout the United States, as well as through a limited number of New York Life Insurance Company’s brokerage distribution partners.

New York Life Insurance Company’s Ratings

New York Life Insurance Company has been in the insurance industry for many years, the ratings that the company currently holds are outstanding related to their financial strength and stability. QLAC is usually issued by New York Life’s division called New York Life Insurance & Annuity Company out of Delaware. See the following ratings:

  • A++ (Superior) from A.M. Best.
  • AA+ from Standard & Poor’s.
  • 100 (out of 100) Comdex Rating

New York Life QLAC offering details.

New York Life’s QLAC is called Guaranteed Future Income Annuity II which is a flexible premium deferred income annuity that provides a stream of income payments guaranteed for the life, or lives, of the annuitant(s), beginning on a date chosen by the policy owner.

  • Issue Age:   QLAC is 31yrs old to 80 yrs old
  • Income start date:  Selected at time of purchase. Flexible income start date feature  allows the owner to after the latest premium payment or defer income payments up to five additional years from the original income start date selected.
  • Income Modes:  Annually, Semi-annually, Quarterly, or Monthly
  • Payment Options: Life with Cash Refund.  This option guarantees that, if the annuitant (or both annuitants for a Joint Life policy) dies before the income payments received equal the premium paid, the beneficiary(ies) will receive a lump sum equaling the premium less all income payments received.
  • Life Only.  This option does NOT guarantee a return of deposit at death.  Income continues for the life of the annuitant, usually at a higher initial income rate than other income options.
  • Optional Features:   Annual income increases, COLA. Allows most policy owners to increase income payments each year by 1% to 3%, depending on the percentage chosen at time of deposit.

NYLife + or - 5 years income

QLAC Income rates comprised

QLAC Defined

The IRS and Treasury Department have released final regulations on the treatment of Qualifying Longevity Annuity Contracts, or QLACs, under the required minimum distribution (RMD) rules of Internal Revenue Code section 401(a)(9). The final regulations provide an exception to the RMD rules, allowing IRA owners to use a portion of his or her account to purchase a deferred income annuity (DIA), in which annuity payments commence at a specified age, no later than 85, while still satisfying the RMD requirements. Deposits are limited to the lesser of $125,000 or 25% of the owner’s IRA values as of 12/31 of the previous year. The value of the QLAC will be excluded from RMD calculations. The dollar threshold may be increased in future years to reflect changes in the cost of living in $10,000 blocks. Income payment types can be Single Life or Joint Life ( Same Sex Partner or Spouse), and Life with Cash Refund of Deposit.  No cash value beyond the initial deposit may present at the time of death of annuitant.

How to use this annuity in retirement planning?

Have your constant lifetime income cover your basic expenses in retirement.  This would include any Social Security, Pensions, and annuity income like New York Life’s QLAC called Guarantee Future Income Annuity series.  Think of a QLAC as a base line for retirement income along with your social security payments.  Having this guaranteed income will allow your other investments to potentially take more risk in turn gaining more return for you.

Studies have shown that converting a small portion, less than 50%, of your retirement funds to an income annuity will increase your retirement portfolio income success rate over a 20-year plus time frame.  By eliminating some of your stock market risk with a purchase of Guaranteed Future Income Annuity will produce lifetime income in retirement that cannot be outlived.

Saving on Health Care and Medicare Premiums in Retirement

How do you save on health care expenses including Medicare premiums during retirement? It’s all based on your retirement income. I will explain later in the article. During retirement fixed costs are essential to be managed and kept low to maximize monthly income. One of the only constant fixed costs in retirement are health care and Medicare expenses which happen to be one of the most expensive in retirement. Medicare premiums are formulated for cost based on a retirees MAGI or modified adjusted gross income. Speaking from the Chicago Retirement Income Summit, Peter Stahl, CFP® stated “The savings are real,”. For example, moving a married couple’s tax bracket one threshold lower can save them $65,000 in Medicare costs over a 20-year retirement.



And the savings are especially important given “health care inflation isn’t grocery-store inflation or Home Depot inflation” — Medicare Part B inflation runs at 7.87% and Prescription Drug Plan Part D is at 7.12%. With the increase of boomers entering the “high medical use” years these already historically high inflations will likely increase in the coming decade.  Certain retirement income streams have tax advantages to keep income lower than traditional portfolio distributions that increase taxable income in retirement. QLAC or Qualifying Longevity Annuity Contract, non-qualified income annuities such as Longevity annuities that use non-IRA dollars, Roth accounts, health savings accounts and permanent life insurance loan distributions are all tax- advantaged way to lower a retirees tax bill with respect to Medicare premiums. Management of RMD, required minimum distributions at age 70 ½ from IRA is also key. Using a QLAC IRA, the deposit excluded in the RMD calculations for tax. The maximum deposit amount is lesser of $125,000 or 25% of your prior years combined IRA balance.  Excluding this amount will automatically lower a retirees RMD tax to over an estimated $20,000 in a retirees lifetime and in turn lower one’s modified adjusted gross income that is reported on your income tax return.

If you are looking for a QLAC that is right for you, then we can help. We work with many of the top insurance carriers in the longevity annuity marketplace today. To get live instant QLAC rates from the top companies click here.

If you have any additional questions, then please feel free to contact us directly toll-free, by dialing 800-325-1833. We are here to help.

Longevity Credits time to act now

Today’s rates could be the highest rates you see for a very long time if you’re thinking of buying an
Boomers are learning about the importance of securing guaranteed lifetime income and they are reaping
the benefits of a secure retirement. As more and more boomers approach retirement age and obtain
annuities to cover their basic expenses, this demand, coupled with increasing life expectancies can have
a dramatic effect on payout rates for future purchasers. Let me explain…
Last October, the Society of Actuaries (SOA) Retirement Plans Experience Committee (RPEC) released
the final report of the RP-2014 mortality tables. The updated tables display a consistent trend of increased
life expectancy. Dale Hall, managing director of research for the SOA stated that, “The purpose of the new
reports is to provide reliable data that actuaries can use to assist plan sponsors and policy makers in
assessing the financial implications of longer lives.”
Let’s start by taking a look at the chart below, which highlights the differences between the 2000 Mortality
Tables vs. the 2014 Mortality Tables:

We see a 2.4 percent increase in life expectancy with 65 year old males and a 2.8 percent increase in life
expectancy with 65 year old females. If we were to continue on this trend, in 2028 we would anticipate to
see life expectancy rise to 88.6 years (for males 65 years old) and 91.2 years (for females 65 years old).
With increased improvements to medical technology, I predict that we will see significant additional growth
in life expectancy and should expect it to rise even greater than the trends indicate.
The updated mortality tables will require insurance companies to lower their payout rates in order to
properly reflect longer life spans. Boomers are in for a quite a shock when they see these adjustments coming. I’m talking about payout rates going from 14 percent to 10 percent, from 9 percent to
7 percent, and from 7 percent to 5 percent. These will not be small adjustments.
People are always asking me why they should buy an annuity in today’s low interest rate environment. I
say that today’s rates are not low. These are the new rates. Today’s rates could be the highest rates you
see for a very long time. Income annuities are really not an interest rate play. They are a longevity credit
When it comes to lifetime income annuities, most people don’t realize how these products are able to
offer such high cash flows and payout rates. These humble annuities offers something that no other
product can offer: longevity credits, otherwise known as mortality credits. This is what separates income
annuities from other investment options.
Cash flow from an income annuity hails from three different sources: interest, a return of principal, and
mortality credits. Traditional investments can typically manufacture two of these components — interest
and return of principal. More importantly, only life insurance companies can manufacture mortality credits.
When payout rates for income annuities are released with the new mortality tables, you will see the
payout rates drop because of an adjustment in longevity credits. Combining the fear of outliving your
money and the uncertainty of the market, you and your clients need to lock in these guaranteed rates
now. These are likely the highest longevity credits you will see for the rest of your life.

Hurry, while supplies last

If the SOA only releases their mortality tables every 14 years, then you might be thinking, “I have a 14-
year window before rates re-balance, right?” Wrong. Many of these mortality adjustments will occur in the
coming months.
Here is another interesting fact: the life insurance industry has only a limited amount of longevity credits.
See, it is the life insurance on the books that provides the built-in hedge to lifetime income annuity sales.
As longevity increases and more people start “fishing” for longevity credits offered by income annuities,
the “longevity credit pool” begins to drain. This will also affect pricing of annuity products in the future.
Consistently educating yourself on the importance of covering 100 percent of your “minimum acceptable
level of retirement income” with guaranteed lifetime income is a must. This approach provides the most
cost-effective and practical way to provide for security in retirement, a matter that should be a top priority
for every boomer.
After covering basic expenses, you will need to put a significant amount of the remaining portfolio into
annuities and invest some into stocks, bonds, and money market funds. By securing annuities earlier in
retirement planning, you can lock in these longevity credits and optimize your retirement portfolio right off
the bat. Just like a day spent fishing, would you much rather cast off into a fully stocked pond as opposed
to a pond with a limited supply of fish?

Article originally posted at:

How Interest Rate Changes Income Payments

Why purchase an QLAC or longevity annuity when interest rates are low?
A QLAC or longevity annuity can be a good way for you to diversify your portfolio
and ensure guaranteed, lifetime income that can help you maintain your lifestyle
throughout retirement. But you may have misconceptions about this type
of solution, including whether you should wait for higher interest rates before
purchasing an annuity. Allow me to set the record straight. Interest rates don’t affect annuity payouts as much as you
think. And, the older you get, the less sensitive to interest
rates your annuity payments will be. Lifetime longevity annuity payouts are based on more than interest rates alone. Your lifetime expectancy and that of others in an annuity pool are key factors. Insurance companies
refer to this as mortality credits or longevity credits and use them (along with your premium payments and current interest rates) to determine your lifetime payout amount.

Sample Age: 55 Gender: Male Deferral: 10 Years
Let’s say your longevity annuity or deferred income annuity payment will be
$10,000 per year. How is that payment calculated? Should you wait until interest rates rise to buy?

As you can see, the amount of income you receive based on current interest rates is a small part of your total income payment. And, as you age, more of your annuity payment comes from
mortality credits while the percentage of interest rate income continues to decrease. And if interest rates increased by 50%, say from long term bond rate of 2% increases to 3%, because rates play such a small role, your annuity income payments would only increase by around two percent. Just waiting a year for rates to climb would do more damage as your age increase and lower deferral period would lower payments more likely than the higher rate would give your income payments. The percentage of your payment linked to credits, meanwhile, continues to grow the longer you live and is often higher than you could achieve through individual investments outside of the annuity.