QLAC Disadvantages | Qualified Longevity Annuity Contract - YouTube

We're going to cover a lot today. About qualified longevity annuity contracts,

including the disadvantages. But remember to watch my video "What is the purpose of

an annuity?" That's a very informative video as well. And you need to get all

the information you can before making an informed decision. So, let's talk about

where we're going to go over today which is a ton.

What is a QLAC. What's the purpose of the QLAC? What does it solve for?

What's the history of it? When did it even start? It's relatively new. It is

actually the newest type of annuity that the annuity industry has. Now, we're going

to talk about obviously the limitations the disadvantages. We're going to talk

about the benefits. How to structure it, how to quote it and where does it fit?

I'm going to let you know how you can get a free copy of my book on QLAC for free

at the end of this video. So, hang in there with me.

So, before we get to the disadvantages of a QLAC, qualified longevity annuity

contract, let's talk about what it is. In essence, a Qlac is a deferred

income annuity. It's a deferred income annuity structure that can be used in

your traditional IRA only, okay? So, with the deferred income annuity, you can use

money to defer up until age 70 and a half. Once you're deferring past age 70

and a half with a deferred income annuity, it turns into a qualified

longevity annuity contract. So, that's what a QLAC is. So, what's the history of

a QLAC, like how did a queue like qualified longevity annuity contract appear on the

scene? Well, in 2014 our friends at the IRS and the Treasury Department came up

with an idea of encouraging everybody with a traditional IRA. And some day also

designed for 401Ks. But for traditional IRA holders, how can we enhance, encourage

them to start in future income stream. To plan for future income. Because Social

Security was not put on the planet as the primary lifetime income pension

source. It was never designed for that. So, what the Treasury Department, IRS

said, "Hey, we're going to have people within their IRA to design to buy qualified

longevity annuity contract." To solve for future income. And that amount of money

that's used for that QLAC will not be counted when you go to calculate your

requirement of distributions your RMDs when you're 70 and a half. Meaning that

the taxes will be lowered on those or RMDs which is a good and now legal

thing now that you have a QLAC. So, that's the history of a QLAC and where it

began. So, what a QLAC soft or qualified long to have the annuity

contracts? They saw for what I call income later. Income in the future. You

can structure it so it's just on your life or you can structure it with your

spouse or partner joint life which is really unique with your individual IRA.

Which means that you're you and your wife could each have a qualified

longevity annuity contract. So, here are the rules the funding rules for QLAC.

Qualified longevity contracts. You can take all of your IRA

assets, 401k, IRAs. If you have three or four IRAs. That total 25% of that total

or $130,000 whichever is less.

Okay? So, guy called me other day sits in I got a million dollar on IRA. You

know, "What am I going to do?" Yeah, I don't need the income but I want to set

something up for my wife or future income. So, under those rules, 25% of the

total or $130,000 which ever is less, he had to put $130,000. So, he had a million

dollar IRA, 130,000 a QLAC. And he set it up joint

life with his wife so that she would have a future pension income when he

passed away. Now, under that same situation, he then has the 130,000-

dollar QLAC. He has a million dollar IRA. So when he goes to

take required minimum distributions, instead of calculating it on a million,

he's calculating it on 870,000. Doesn't sound like a

lot. But it's a legal way to lower taxes. And under the same rules, you can lower

your taxes on your required minimum distributions as well. Alright. So, let's

get to the meat of the matter here. The disadvantages the limitations of

qualified longevity annuity contracts. First of all, they're very rigid. I mean

there's no liquidity with a qualified longevity annuity contract with most

carriers. They're not going to allow you to pivot get all this income and all of

a sudden cash it out. The IRS and the Treasury didn't want that. They wanted

you to plan for income and they wanted to make it almost your revocable so that

that income stream would be in place to complement your Social Security. So,

there's some method behind the madness but it certainly is a disadvantage and a

limitation. Another one is that there's no trackable interest growth during the

deferral year. So, you're saying... So, if I put it in a 70 by a 70 in it and I start

the income at age 75, what's the interest on that? There's no trackable interest.

But the longer you allow in a new income you need to hold on to the money, the

more they enhance the payout in the south, the longer it cooks the more you

get. So, the longer you let the money cook, the more they're going to pay you on the

back end. Remember that the payments are based on life expectancy primarily. Not

interest rates. So, the older you are, the higher the payment. Just like Social

Security. The other limitation in my opinion is the

fact that the rules are in place is 25% of your total IRA assets or $130,000,

whichever is less. Oh, I wish that was higher for you IRA

holders out there. I think it's going to incrementally grow. But for now, $130,000

for 25% your IRA whichever is less are the current rules. So, what are the

benefits? The benefits are numerous on qualified longevity annuity contracts in

my opinion. In my opinion, they should be the number one sold annuity type in the

country because everyone has an IRA. Everyone needs income with 10,000 baby

boomers retiring every single day. Mostly an income for at least one spouse. So, the

benefits are numerous. I mean you can, structure it your life, you can

structure it joint life. You can structures so that 100% of any

unused money goes to the list of beneficiaries of the policy. You can

latter QLAC contracts. Qualifying longevity annuity contracts. In other

words, you can take the $130,000 amount split it in 2 and say buy a $65,000

QLAC starting at age 75. And the other 65 starting at age 85. So, that's pretty

cool as well. So, you can customize that. And also remember that you don't have to

start the income at 85. A lot of people say, "Well, I don't want to buy a QLAC

because I don't want to start it that late." You can start it early as a 71. And

as late as 85. At age 85, you have to turn on a qualified longevity annuity

contract income stream. But the benefit is income later.Tthe benefit is

guaranteed income you can never outlive. The benefit is a pension plan for both

you and your spouse if you want to structured that way that will pay you

for the rest of your life. So, let's drill down a little bit more on the

structuring choices. Currently the most popular structuring choice is either

life with cash refund or joint life with cash refund if you want to add a spouse

to the guaranteed lifetime income stream. What does that mean? Life with cash

refund joint life with cash refund means that you're transferring the risk to the

annuity company to pay you or you and your spouse for the rest of your life.

You could never ever outlive it. I don't know the return on investment ROI until

you die. Right? No ROI until you die because it's a

lifetime income guarantee. Now, the cash refund part? What that means is even

though the annuity companies only hook to pay you forever, when you die...

It's just you. When you die, 100% any unused money goes to the

beneficiaries. If it's joint life with cash refund. When you die, your spouse

continues to get the income stream uninterrupted and unchanged for their

life and then when they die, whatever is left in the account goes to the

beneficiary. Just remember that all annuity income is combination of return

of principal plus interest. Now, the highest contractual payout that you can

structure with a QLAC is life only or joint life only. But understand when your

learjet hits the mountain, money goes poof. Most people have worked really hard

to put money in their IRA and they choose the cash refund option with the

life guarantee because they want 100% of that hard-earned money to go to their

beneficiaries if they die early. But they still want that guaranteed lifetime

income stream. So, how do you quote... How you get a quote for a qualified

longevity annuity contract. Obviously go to standing new team in and we'll send

you that quote. And no one's going to follow up show up at your door and call

you and pester you we're just going to give you the information. But it's like

buying a plane ticket. Qlacs, qualified longevity annuity contracts are

commodity tech products. In other words, there's a bunch of carriers that offer

them. The quotes change it's like a gallon of milk every 7 to 10 days, it

changes. So, quote all carriers. To choose the carrier that you like based on the

claims paying ability of that carrier. But understand that there's not just one

company that's the best QLAC company. It's always changing just like that

buying a plane ticket, quote all carriers. So, where does a QLAC fit in your

portfolio? Income later. Income later and I also think legacy. Meaning leaving

money to a loved one. So, let's talk about the first one worth this. Income later.

You need income in the future? Qualified longevity annuity contract works because

you can use your traditional IRA to lock in that guarantee. You can add your

spouse or partner as a joint lifetime income guarantee meaning that when you

die, the income continues uninterrupted and unchanged for their lives. So, that's

kind of where it fits. Now, from a legacy standpoint, a lot of you players

out there, a lot of you guys that just killed it. And ladies that's just killed

it. right? You've done well. Your IRA is huge. You don't need the money, but guess

what? You have a spouse that you want to take care of. You want to they don't care

about the markets like you do. They don't watch CNBC and they don't watch these

other channels. They just want to make sure that they're

going live a good life or go see their grandchildren and children. A lot of

people are buying to QLACs for that legacy aspect. Meaning that I don't

really need the income but my spouse might I'm going to buy one just to make

sure that that income streams going to come into them uninterrupted and unchanged

for their life when I die. So, that's kind of where it fits. Income later and a

little bit of legacy. So, let's close this. Remember the book I've talked to you

about? Qualified longevity annuity contract owner's manual. I wrote it and

I'm going to send it to you for free. No, obligation, no cost. No one's going to call

you, show up at your doorstep. You don't have to go to bad chicken dinner seminar

and here's some horrible pitch. I'm going to send it you in this package --this gold

package. So, order the book click the link below.