QLAC and Medicare Premiums: How a Longevity Annuity Reduces IRMAA Surcharges
A qualified longevity annuity contract (QLAC) lets you carve up to $210,000 out of your traditional IRA and defer it until age 85 — and the IRS removes that amount from your RMD calculation entirely while it sits there. Smaller RMDs mean lower IRMAA MAGI and lower Medicare Part B and Part D surcharges for every year until the QLAC payments begin.
What is a QLAC?
A qualified longevity annuity contract is a deferred income annuity purchased from a life insurance company using assets from a traditional IRA, 401(k), 403(b), or 457(b) plan. It is specifically recognized under IRC § 401(a)(9) and 26 CFR § 1.401(a)(9)-6, which allows the IRS to exclude the contract value from your required minimum distribution calculation until income payments actually begin.2
The core mechanics:
- You buy the contract today using IRA or 401(k) funds. The purchase amount leaves the pool of assets subject to RMDs immediately.
- Nothing happens for years. The contract sits in your account, growing (on the insurance company's balance sheet), while your remaining IRA balance generates RMDs based on a smaller starting figure.
- At an age you choose — up to age 85 — the contract begins paying a guaranteed monthly income for life.
- When payments start, they count as ordinary income and flow fully into IRMAA MAGI. The deferral ends.
Unlike a regular deferred annuity, a QLAC must meet specific IRS requirements to qualify: it cannot offer a cash surrender value, cannot accept return-of-premium features that effectively function as cash value, and must begin distributions no later than the first day of the month after your 85th birthday.
2026 QLAC rules and limits
| Rule | 2026 value | Source |
|---|---|---|
| Maximum QLAC purchase (per person) | $210,000 | IRS Notice 2025-67 (indexed from $200K base) |
| Percentage cap | None — SECURE 2.0 eliminated the old 25% cap | SECURE 2.0 Act § 201 |
| Eligible accounts | Traditional IRA, 401(k), 403(b), 457(b) | IRC § 401(a)(9); NOT Roth accounts |
| Latest start date for payments | First day of month after 85th birthday | 26 CFR § 1.401(a)(9)-6(q) |
| Earliest start date | Any age — choosing earlier reduces longevity insurance value | IRS Form 1098-Q instructions |
| Cash surrender value | Not permitted (by definition) | 26 CFR § 1.401(a)(9)-6(q)(2) |
| Death benefit (before payments begin) | Permitted — passes to beneficiaries as ordinary income | 26 CFR § 1.401(a)(9)-6(q)(4) |
| Per-person limit (married couple) | $420,000 total if both spouses each fund a QLAC | $210K per person × 2 |
| IRS reporting | Custodian issues Form 1098-Q for purchases and distributions | IRC § 6047(f) |
How QLACs reduce IRMAA: the mechanism
IRMAA is based on your Modified Adjusted Gross Income (MAGI) from two years prior. Traditional IRA and 401(k) distributions — including RMDs — count as ordinary income and enter MAGI dollar-for-dollar. Lower RMDs mean lower MAGI, which can mean a lower IRMAA bracket and lower Medicare Part B and Part D premiums.
When you purchase a QLAC, the IRS removes the contract value from your year-end IRA balance before calculating your RMD divisor. The effect is immediate and lasts until payments begin:
RMD without QLAC: IRA balance ÷ ULT divisor for your age
RMD with QLAC: (IRA balance − QLAC value) ÷ ULT divisor for your age
Annual RMD reduction: QLAC value ÷ ULT divisor (the divisor "works on" the QLAC as if it weren't excluded)
For a 73-year-old (ULT divisor 26.5), a $210,000 QLAC reduces the annual RMD by $7,925 ($210,000 ÷ 26.5). For a 75-year-old (divisor 24.6), the same QLAC reduces the RMD by $8,537. The older you are when you buy, the larger the annual RMD reduction — because the same dollar amount is divided by a smaller divisor. This reduction then flows into MAGI two years later as an IRMAA benefit.
Worked example: crossing back under the IRMAA threshold
Dorothy is 72, recently retired, with a $1.6M traditional IRA. Her other annual MAGI (Social Security + taxable dividends) is $58,000. She files as single.
| Item | Without QLAC | With $210K QLAC |
|---|---|---|
| IRA balance for RMD calculation | $1,600,000 | $1,390,000 |
| ULT divisor at age 73 (first full RMD year) | 26.5 | 26.5 |
| Annual RMD | $60,377 | $52,453 |
| Other MAGI (SS + dividends) | $58,000 | $58,000 |
| Total IRMAA MAGI | $118,377 | $110,453 |
| IRMAA tier (single; threshold $109K) | Tier 1 | Tier 1 |
| Annual Medicare surcharge | $1,148 | $1,148 |
In Dorothy's case, the QLAC reduces her RMD but doesn't move her out of Tier 1 at this income level. Now consider her neighbor Harold, 73, same $1.6M IRA but $48,000 in other MAGI (more modest Social Security, no pension):
| Item | Without QLAC | With $210K QLAC |
|---|---|---|
| Annual RMD | $60,377 | $52,453 |
| Other MAGI | $48,000 | $48,000 |
| Total IRMAA MAGI | $108,377 | $100,453 |
| IRMAA tier | Base (barely, $623 under cliff) | Base (with $8,547 cushion) |
| Annual surcharge | $0 (but cliff risk) | $0 (with buffer) |
Harold is already at Base rate, so the QLAC doesn't lower his bill — but it significantly reduces his cliff risk. Any capital gain, unexpected income, or medical sale that would push him over $109,000 is now buffered by the $7,924 annual RMD reduction. For someone near a bracket edge, the QLAC acts as insurance against the cliff as much as it reduces current premiums.
QLAC IRMAA impact calculator
Enter your IRA balance and QLAC purchase amount to see the effect on your RMD and IRMAA bracket.
Trade-offs and risks
QLACs are irrevocable purchases. They are not appropriate for everyone. Before evaluating a QLAC, understand the trade-offs:
| Trade-off | What it means |
|---|---|
| Mortality risk | If you die before payments begin at age 85 and you chose no death-benefit rider, the contract may pay nothing (or only a reduced death benefit). The insurance company keeps the remainder. With a death-benefit rider, beneficiaries receive payments — but riders reduce the payout amount. |
| Illiquidity | QLAC funds cannot be accessed before the income start date. No loans, no early withdrawal. The $210,000 is fully locked up. Make sure the rest of your portfolio covers emergency and lifestyle needs. |
| Income spike at 85 | When payments begin, the annual QLAC distribution becomes ordinary income and flows into IRMAA MAGI. A QLAC paying $18,000/year at age 85 could push you into a higher tier at that point — especially if your RMDs on the remaining balance are also significant. |
| Inflation | Most QLACs pay a fixed nominal amount. Inflation erodes purchasing power over 13+ years of deferral. A few insurers offer CPI-adjusted QLACs, but they cost significantly more (lower initial payout). |
| Insurer credit risk | You're relying on the insurer to pay at age 85. Choose an insurer with strong financial strength ratings (A.M. Best A+ or better). State guaranty associations provide some backup ($100K–$500K limits vary by state). |
| Opportunity cost | The $210,000 invested in stocks earning 7%/year would grow to ~$540,000 by age 85 (at age 72). A QLAC's value is in guaranteed income and longevity protection, not investment growth. |
QLAC vs. other IRMAA reduction strategies
| Strategy | How it reduces IRMAA | Reversibility | Best for |
|---|---|---|---|
| QLAC | Removes purchase from RMD base; reduces RMDs for 10–15 years | Irrevocable | Large IRA ($1M+), good health, age 68–75, near a bracket threshold |
| QCD (up to $111K/person) | Direct IRA-to-charity transfer; bypasses AGI entirely | Annual — repeatable or stoppable | Charitable donors age 70½+; works alongside QLAC |
| Roth conversion (pre-RMD) | Reduces future IRA balance → smaller future RMDs permanently | Taxable in conversion year; permanent reduction thereafter | Ages 60–72 with lower-income years; long time horizon |
| Capital gain timing | Avoid stacking gains with RMDs in same calendar year | Flexible annually | Anyone with a taxable account; low-friction annual planning |
| SSA-44 appeal | Petition SSA to use current-year (lower) income if qualifying event | One-time per life event | Retirees in retirement year with income spike from prior work |
QCDs and Roth conversions are generally evaluated before a QLAC because they are reversible and flexible. A QLAC is appropriate when you have maximized QCDs for the year (up to the $111,000 limit), your income is too high for Roth conversions without triggering a higher IRMAA tier, and you have a specific need for guaranteed income at advanced age. The strategies also stack: you can buy a QLAC and direct QCDs from the remaining IRA balance in the same year.
Who benefits most from a QLAC for IRMAA purposes
- Large traditional IRA or 401(k) — the bigger the IRA, the larger the annual RMD reduction from a $210,000 QLAC. Someone with $2M benefits more than someone with $300K.
- Currently near an IRMAA threshold — the QLAC pays off most when it crosses a bracket line. If you're $12,000 over the Tier 1 floor and the QLAC saves $8,000/year in RMDs, you cross back under the threshold.
- Good health and family longevity — the QLAC's insurance value comes from living to 85+. Someone with serious health conditions should evaluate whether the RMD reduction justifies the irrevocable commitment.
- Age 68–75 — buying too early (60s) means a very long deferral with significant mortality risk. Buying too late (80s) leaves few years of RMD reduction before payments begin.
- Not heavily dependent on IRA assets for near-term expenses — the QLAC amount is fully illiquid. You need enough liquidity outside the QLAC to cover spending through age 85.
- No spouse who would be disadvantaged by loss of death benefit — or has specifically chosen a joint-and-survivor QLAC structure, which reduces payout amounts but continues income to a surviving spouse.
The income spike at age 85: plan for it now
When your QLAC payments begin, they are ordinary income and count toward your IRMAA MAGI that year — affecting Medicare premiums two years later. A $210,000 QLAC purchased at age 72 that starts paying at age 85 might generate $18,000–$30,000/year depending on the payout rate quoted at purchase (influenced by prevailing interest rates and the insurer's mortality tables). That income arrives on top of your remaining RMDs, Social Security, and other income.
Run the projection both ways: what does your IRMAA picture look like at age 85–87 with and without the QLAC income? For some retirees, the RMD reduction during ages 73–84 more than compensates for the income spike at 85. For others — particularly those who expect their IRA balance and RMDs to have declined significantly by age 85 — the spike may actually create a higher net IRMAA exposure in the long tail of retirement.
This multi-decade modeling is the core of what a Medicare-specialist financial advisor does: model IRMAA across your entire retirement, not just for the next two years.
Related guides
- RMDs and Medicare Premiums — the compounding RMD problem, QCDs, and a 5-year projection calculator
- 7 strategies to reduce IRMAA surcharges — comprehensive strategy comparison
- Roth conversions and IRMAA — bracket cliff tables, pre-65 conversion window
- What counts as income for IRMAA? — full MAGI inclusion/exclusion table
- 2026 IRMAA brackets and thresholds — complete reference table
- Annuity income and IRMAA — how non-QLAC annuity distributions affect Medicare premiums
Model a QLAC purchase with a specialist before committing
A QLAC is an irrevocable, multi-decade decision. The IRMAA benefit depends on your specific IRA balance, income profile, other strategies you're running (QCDs, Roth conversions, capital gain timing), and projections across retirement. A fee-only advisor who specializes in Medicare planning can run the multi-year model — including the IRMAA impact at age 85 when payments begin — and compare the QLAC against alternatives before you lock anything in.
Sources
- CMS, 2026 Medicare Parts A & B Premiums and Deductibles (November 2025). 2026 IRMAA Tier 1 surcharge: Part B $81.20/mo + Part D $14.50/mo = $95.70/mo = $1,148.40/year per person. Tier 2: Part B $202.90/mo + Part D $37.40/mo = $240.30/mo = $2,883.60/year. Values verified May 2026.
- IRS, Instructions for Form 1098-Q (2025). QLAC defined under IRC § 401(a)(9) and 26 CFR § 1.401(a)(9)-6. Contract value excluded from RMD calculation; payments must begin no later than age 85. SECURE 2.0 Act § 201 (2022) eliminated the 25% cap and raised the flat limit to $200,000, indexed for inflation. 2026 limit: $210,000 per IRS Notice 2025-67. Verified May 2026.
- SSA, Medicare Premiums: Rules for Higher-Income Beneficiaries. 2026 IRMAA thresholds: single filer tiers at $109,000 / $137,000 / $171,000 / $205,000 / $500,000; MFJ at $218,000 / $274,000 / $342,000 / $410,000 / $750,000. Based on 2024 MAGI (two-year look-back under IRC § 1839(i)). Verified May 2026.
- IRS, Publication 590-B (2025), Distributions from Individual Retirement Arrangements. IRS Uniform Lifetime Table (T.D. 9911, effective January 1, 2022): age 72 divisor 27.4; age 73 divisor 26.5; age 74 divisor 25.5; age 75 divisor 24.6; age 76 divisor 23.7. RMD = account balance ÷ applicable ULT divisor. QLAC value excluded from balance before divisor is applied. Verified May 2026.
All IRMAA values reflect 2026 Medicare rules (based on 2024 MAGI). QLAC limit $210,000 per IRS Notice 2025-67. RMD divisors from the IRS Uniform Lifetime Table (T.D. 9911, effective 2022). Values verified May 2026.
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