At age 72*, most retirees must begin mandatory minimum withdrawals from their retirement accounts such as 401(k)s and IRAs known as Required Minimum Distributions (RMD). Many seek a tax advantaged way to continue growing the funds they withdraw and consider Qualified Longevity Annuity Contracts, or “QLACs”, as an option. Subject to certain conditions, QLACs are annuities that allow one to defer receiving payments until age 85 while the funds grow tax free. The IRS allowed for QLACs to address longevity and the risks posed by outliving one’s savings. Various financial advisors, such as Ric Edelman, have discussed whether QLACs are the best choice for your money.
As a better alternative, military and honorably discharged veterans should take advantage of AAFMAA’s Wealth Builder Life Insurance policies. Wealth Builder Life Insurance offers a superior alternative to a QLAC. For a net-single premium of $750, one obtains an immediate whole life policy with a death benefit of $1,000 (policies are available from $10,000 - $1,000,000 coverage. Moreover, the policy’s cash value and death benefit grow tax free at a current crediting rate of 4.25% (not guaranteed, subject to change) and a guaranteed crediting rate of 2.75% (minus a small administrative fee of .75%). These policies are available regardless of age, sex, or nicotine use and require no medical records or physicals. And, if the owner seeks a QLAC-like income stream, they have the option to annuitize immediately upon purchase or in the future (or never and just retain as a life insurance policy). Visit AAFMAA’s web site (https://www.aafmaa.com) for more information on Wealth Builder Life Insurance and AAFMAA’s other services.
*In 2020, the age at which Required Minimum Distributions (RMDs) from qualified plans (401(k), TSP, 403(b) and IRAs) must begin changed from the year in which the investor turns age 70.5 to 72. Note that this change applies to you if and only if you turn 70.5 in 2020 or later. If you turned 70.5 in 2019 or earlier, you must continue to take RMDs.
This article was originally published February 24, 2016.