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" since the introduction of last year’s Treasury Regulations, a so-called “Qualified Longevity Annuity Contract” (QLAC) can even be purchased inside of an IRA or other retirement account, allowing a portion of a retiree’s RMDs to be deferred from 70 ½ to as late as age 85!
However, as it turns out the unique nature of a longevity annuity’s payment structure is not very hospitable as an RMD deferral strategy. The fact that it can take until a retiree’s late 80s just to break even and recover principal means the retiree risks significant foregone growth by trying to merely defer RMDs through the use of a QLAC. And of course, the RMDs will still eventually happen anyway, as the QLAC merely defers when payments begin. In fact, ironically, if the retiree does live, the accelerated payments of a QLAC in the later years can actually deplete an IRA even faster than normal IRA RMDs would have anyway! "
The Problem With Using A QLAC To Avoid RMD Obligations
While it may appear intuitively appealing to use a QLAC to defer RMDs from age 70 ½ out as late as age 85, there is an important caveat to consider – delaying payments until age 85 also means that the retiree doesn’t get the money back until that point, either! And in fact, even when the payments begin, it takes several years for the payments just to add up to the original principal. Which means the retiree may be deferring RMDs along the way, but in a pure economic sense, must also live until his/her late 80s just to break even and recover the original principal!
Well, it's too late now, but I hope you were aware that Option B at 5x wasn't a simple yes/no situation. He could have decreased the multiple to 1x, 2x, 3x, or 4x his salary in order to save some money. It wasn't necessary to cancel the entire option.
It sounds like you've got plenty of other life insurance anyway (unless of course, you and he didn't elect for him to have his FERS annuity reduced 10% in order to provide you with a 50% survivor's annuity.)
Yes, he chose the reduce to provide me with survivor's annuity.
see ? i have been trying to explain this to you for a long time . as we get an education in this stuff our views tend to change and we realize we were basing things on only what we know and not what we don't know .
i have ed slotts life insurance ploy on the radar to try to convert some always taxable ira money in to nice tax free life insurance money for my spouse .
it is a shame when folks give these permanent policy's up , paid a fortune extra for coverage until death based on a 100% chance of payout and then do not use it for dying .
in the mean time some of the best tax moves involve using those policy's in retirement .
I am still not sure there is any insurance/annuity product or other magic solution to the tax issue. I did benefit from years of 403b/401k growth without taxation. Now I guess I pay. I just want to keep the tax bill down and protect against even higher Sander's type tax rates in the future.
here is something , paying nice tax free money to your spouse if you die with no rmd's ever and not dependent on the whims of rates and stock markets .
why would someone ever want that ?
having diversified sources of income in retirement to compliment your own investing which can be variable can be very helpful ,especially to a widow .
an integrated stratagy using spia's , your own investments and permanent life insurance can be a great retirement strategy combining the benefits of a pensionized income and the benefits of your own investing as well as tax free money for your spouse or heirs .
the tax free part can be so important when so many things hinge on your taxable income in retirement . everything from getting ss taxed to what you pay for medicare is linked to those numbers .
a widow has to file single and lose an ss check too . so yeah , you all may need to look beyond raising a family and learn what a benefit an integrated strategy can be ..
think about how nice it would be having a check in the mail box monthly covering all the non discretionary bills for life regardless of the markets and an income stream you could never outlive , your own investing for growth and inflation adjusting for the discretionary spending and permanent life insurance locking in tax free money for your spouse not market dependent nor ever having rmd's and the taxes that go with it on that insurance money ..
the younger your spouse the greater this works .
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My comments were with regards to the typical term life insurance products. What you've described is a totally different ball game.
here is something , paying nice tax free money to your spouse if you die with no rmd's ever and not dependent on the whims of rates and stock markets .
why would someone ever want that ?
having diversified sources of income in retirement to compliment your own investing which can be variable can be very helpful ,especially to a widow .
an integrated stratagy using spia's , your own investments and permanent life insurance can be a great retirement strategy combining the benefits of a pensionized income and the benefits of your own investing as well as tax free money for your spouse or heirs .
the tax free part can be so important when so many things hinge on your taxable income in retirement . everything from getting ss taxed to what you pay for medicare is linked to those numbers .
a widow has to file single and lose an ss check too . so yeah , you all may need to look beyond raising a family and learn what a benefit an integrated strategy can be ..
think about how nice it would be having a check in the mail box monthly covering all the non discretionary bills for life regardless of the markets and an income stream you could never outlive , your own investing for growth and inflation adjusting for the discretionary spending and permanent life insurance locking in tax free money for your spouse not market dependent nor ever having rmd's and the taxes that go with it on that insurance money ..
Yes, he chose the reduce to provide me with survivor's annuity.
Excellent.
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