The IRS recently released new rules regarding longevity annuities. like most IRS changes, these new rules have created an opportunity.
The new rules, announced in July of 2014 are meant to address the financial risks of increasing life expectancy. With people living longer, there is an increased risk that retirement assets will be insufficient to meet the demands of a longer retirement. As most of you know, IRS guidelines require qualified plans, including IRA annuities, to begin Required Minimum Distribution (RMD’s) from an account by April 1 of the calendar year in which the employee attains age 70 1/2. Now, under the new guidelines, certain deferred income annuity contracts can now be classified as a “Qualified Longevity Annuity Contract”, or QLAC for short. The new rules exempt the premium paid for any contract that meets the stated guidelines from the future RMD calculations.
For our clients, this means they can now keep a portion of their qualified assets away from the RMD calculations. By doing this they accomplish at least 2 things –
- They can defer the tax burden that the RMD would bring
- They can be better prepared to address the risk of outliving their assets.
As always, IRS rule changes give us a chance to provide service. Next time you talk to a client who has qualified money, create curiosity by asking them if they have heard of the QLAC. Then be prepared to provide service.