Qualified Longevity Annuity Contract Pros and Cons

As people continue to live longer, the idea of a secure retirement becomes increasingly important. One retirement tool that has been gaining popularity in recent years is the qualified longevity annuity contract (QLAC). QLACs offer a guaranteed stream of income for life, but like any retirement tool, there are both pros and cons to consider before investing.


1. Guaranteed income: QLACs offer a secure stream of income for life. This income isn`t subject to market fluctuations, making it a reliable option for retirees worried about market volatility.

2. Tax benefits: QLACs offer tax-deferred growth, meaning that the money invested in a QLAC isn`t taxed until it`s withdrawn. This can be especially beneficial for retirees in high tax brackets.

3. Preserves other retirement assets: By using a QLAC to generate income, retirees can preserve other retirement assets such as 401(k)s or IRAs. This can be especially important for those worried that they may outlive their savings.


1. Limited liquidity: QLACs generally have limited liquidity, meaning that the money invested in them is tied up for a number of years. This can limit a retiree`s ability to access their money if they need it before the QLAC payout begins.

2. Lack of inflation protection: Unlike other retirement tools such as annuities, QLACs generally don`t offer inflation protection. This means that the income provided by a QLAC may not keep up with rising costs of living.

3. High fees: QLACs can come with high fees, which can eat into the income provided by the annuity. Investors should carefully consider the fees associated with a QLAC before investing.

In conclusion, QLACs can be a valuable retirement tool for those looking for a guaranteed stream of income. However, it`s important to carefully weigh the pros and cons before investing to ensure that it`s the right retirement tool for your individual needs.