Cyberattacks against accounting software firm Wolters Kluwer and the City of Baltimore in May showed how the newest wave of malicious hacking can have significant, often...Technologyread more
The European parliamentary election is the second largest democratic exercise in the world.Europe Newsread more
Biden had criticized Kim Jong Un as a "dictator" and a "tyrant" at a recent rally in Philadelphia. North Korean state media responded by calling Biden a "fool of low IQ" among...Politicsread more
Buybacks have gotten a bad rap from both Republicans and Democrats. But stocks would be trading at a massive discount without them.Marketsread more
Microsoft shares have gained 133% since November 2015, outperforming a tech "basket of unicorns" over that stretch.Technologyread more
The president's state visit comes amid tensions with carmaker Toyota over potential auto tariffs. Trump has repeatedly threatened Japanese and European carmakers with tariffs.Traderead more
The IRS is about to release a new draft of Form W-4, which will more closely reflect the changes stemming from the Tax Cuts and Jobs Act. For workers, that means they'll need...Personal Financeread more
The Mega Millions jackpot has spilled over $400 million. It would be the ninth largest winning since the game began in 2002.Personal Financeread more
Trump was speaking at a meeting of Japanese business leaders in Tokyo during his state visit to Japan on Saturday.Marketsread more
The biggest U.S. gasoline price surge in years is running out of steam just in time for the start of the summer driving season.Energyread more
When commercial real estate investor Manny Khoshbin spent $2.2 million on the fastest production car in the world, he had no idea it would very quickly also become the...Autosread more
An average 65-year-old man today can expect to live to age 84. For a 65-year-old woman, it's age 87. And those are just averages.
If outliving your savings is a big fear, one relatively new option to make your money last in retirement has become more widely available—a qualified longevity annuity contract, or QLAC.
In July 2014, the Internal Revenue Service and Treasury Department ruled that QLACs, a type of deferred income annuity, could be included in IRAs or other retirement accounts. Under current rules, investors are allowed to put up to $125,000 from a traditional IRA or employer-sponsored retirement plan into a longevity annuity that pays out at a much later date, anywhere from age 70½ years until age 85 (with payments increasing the longer you wait).
The advantages of a QLAC are that they provide a stream of lifetime income if an investor reaches old age and contributions to a QLAC can decrease required minimum distributions from an IRA or retirement plan that occur once an investor turns age 70½.
"For someone who doesn't need all the money now, [a QLAC] can be a valuable tax reduction tool," said Gilbert Armour, a certified financial planner at Sagepoint Financial in San Diego.
In August, Fidelity Investments, the nation's largest provider of retirement accounts, began offering QLACs from Guardian Life Insurance, MetLife and Principal Financial Group to its IRA investors.
Ten insurers now provide QLACs, according to insurance research and consulting firm LIMRA. They are AIG, Americo, Guardian, Lincoln Financial, MetLife, New York Life, Northwestern Mutual, Pacific Life, Principal and Thrivent Financial. MetLife is currently the only provider offering QLACs to employer-sponsored retirement plans, such as 401(k)s, according to LIMRA.
If you want to invest in a QLAC, it will take some effort to research the best options. "The biggest caveat for the clients is to do some comparative shopping before deciding which company to use," said Rose Swanger, a certified financial planner in Knoxville, Tennessee.
But it can be worth the effort. Buying a QLAC early means a bigger benefit down the road.
"The biggest mistake a client can make when buying a QLAC, assuming the client doesn't need the income before 75 or so, is not purchasing a QLAC soon enough," said Robert Klein, a certified financial planner and president of the Retirement Income Center in Newport Beach, California. "The sooner you purchase it, the longer the deferral period and the greater the income you will receive."
To be sure, low interest rates mean that annuity payments, including those from QLACs, are relatively modest now and investors run the risk that inflation will eat away at payouts over time.
That said, it's early days for QLACs. "They will increase in popularity as more carriers offer them," Klein said. "I believe that higher net worth individuals with large IRA balances will gravitate toward them if the current investment limitation of $125,000 is meaningfully increased."
But not everyone is so optimistic. Chris Chen, a certified financial planner in Waltham, Massachusetts, finds QLACs to be a "clumsy answer" to retirement income.
"People who would benefit—people with not enough resources for a long retirement—will tend not to buy [QLACs] precisely because they don't have enough resources," Chen said. "People with plenty of resources won't need them. People in between will be stuck in analysis paralysis."