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Old 09-18-2017, 02:48 AM
 
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don't forget , we are not discussing the use of an annuity . that is not the question here . it is specifically putting that qlac in an ira .

there is only one reason to do that and that is to push rmd's out to 85 or there is not 1 benefit to doing so . it is the only benefit from using an ira ..

qlc's fall under different rules than just deferred annuities . i like longevity annuities as a planning tool ,especially if you have a limited amount of funds .

qlac's are a very inefficient use of your money in an ira because break even is 92 if you put it in an ira because of age 85 rmd's. otherwise why bother putting it in an ira .

pretty much kitces explained why in his article, they can be a poor planning tool in an ira and that is the case , not because they are a form of deferred annuity .

it is because the main benefit of putting it in an ira will likely have you doing very poorly compared to not putting the same product in an ira and drawing it earlier .

these are not priced like a longevity annuity . basically you are paying full fare and on your own making it a longevity annuity instead of paying the typical discounted price for a longevity annuity ,.

basically you wasted very valuable tax advantaged compounding space in the ira where growth assets should be , not an insurance policy .

https://www.kitces.com/blog/why-a-ql...md-obligation/

Last edited by mathjak107; 09-18-2017 at 03:24 AM..
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Old 09-18-2017, 04:21 PM
 
Location: SW US
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As far as I can see, the only real benefit to a QLAC is to defer the taxes you would pay on RMD's until you are older. My parents lived to 95 so I might get some slight benefit at payout time. But I would also have to deal with a greater tax burden at 85+ when I'm drawing on the QLAC. The older you get, the harder it is likely to be, mentally, to plan these things well. And maybe tax rates would be higher then too.
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Old 09-18-2017, 04:39 PM
 
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Not meaning to play devil's advocate here, but the QLAC has limited funding amounts. I can see the possibility of Medical/Dental/Long-Term Care expenses on Schedule A wiping out the tax liability of an 85 year old... especially if that 85 year old does not have LTCi.
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Old 09-18-2017, 04:55 PM
 
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so why do it in an ira and why wait to take it until 85 ? you are really paying a premium because there are really no mortality credits with these products so it is not like buying a regular longevity annuity for a fraction of the amount and pays the same thing . the math makes little sense in an ira or for taking it at 85.

buy a longevity annuity which are highly discounted if you want something to first take at 85 if you live because they carry mortality credits ..
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Old 09-19-2017, 09:29 AM
 
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Well, I'm thinking:

1. Everyone's tax situation is different. But I can see a situation where someone is healthy, has good genetics and plans to work until say age 70... or even doesn't plan to work but has enough income in these earlier years that his RMD will be taxed... whether or not there is a tax torpedo because of it. And I can see that perhaps the thinking might be that if the RMD is pushed out to say age 85 when the plan is to enter a CCRC or an expectation of Long term care needs... and the medical expenses on the Schedule A will wipe out or significantly reduce the tax consequences... a QLAC could make sense.

2. I can also see that since the original poster has the majority of his assets in an IRA (and I am assuming it is a Traditional IRA) that he would need to withdraw those assets to buy the annuity and pay tax on the lump sum in the year of withdrawal. That lump sum might cause him to be in a higher tax bracket, or just significantly reduce his assets. So, at that point it could very well make sense to just purchase an annuity inside of the IRA and not have to take the immediate tax hit. Even if it isn't doing anything for him tax-wise, it is reducing his risk of running out of money.
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Old 09-19-2017, 12:27 PM
 
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I am the OP so try to clarify the situation. Yes I only refer to traditional, not Roth IRA. I have no plan to take lump sum out to buy annuity which is insane. I just wonder if I can buy it inside the IRA , withdraw at least RMD down the road. Now Lookingat, you think it's feasible?

Quote:
Originally Posted by LookingatFL View Post
Well, I'm thinking:

......snip...
2. I can also see that since the original poster has the majority of his assets in an IRA (and I am assuming it is a Traditional IRA) that he would need to withdraw those assets to buy the annuity and pay tax on the lump sum in the year of withdrawal. That lump sum might cause him to be in a higher tax bracket, or just significantly reduce his assets. So, at that point it could very well make sense to just purchase an annuity inside of the IRA and not have to take the immediate tax hit. Even if it isn't doing anything for him tax-wise, it is reducing his risk of running out of money.
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Old 09-19-2017, 01:12 PM
 
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Finewbie, It is possible to do. That does not mean that I think it is the wise thing to do. Since I do not know your financial situation, and I am not a financial planner, it would be in your best interest to talk to both a CPA and a CFP.

If I remember correctly, Northwestern Mutual has an annuity that can be purchased inside of an IRA. I looked at it a few years ago and did not like it for me. I'm sure other highly rated insurance companies have them also.
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