BOSTON--(BUSINESS WIRE)--Fidelity Investments® today announced that Qualified Longevity Annuity Contracts (QLAC) are now available through The Fidelity Insurance Network®. The current QLAC offerings through Fidelity include products from The Principal Financial Group, The Guardian Life Insurance Company and MetLife, Inc.
A QLAC provides retirees with greater flexibility for a portion of the tax-deferred assets they’ve taken a lifetime to accumulate, through the purchase of a deferred income annuity with an income start date after the age of 70 ½ that doesn’t conflict with mandatory Minimum Required Distribution (MRD) rules. Rather than calculating the amount of an MRD withdrawal on the entire value of all accounts, retirees now can use a portion of a traditional IRA to establish a guaranteed stream of income with a start date as late as age 851 . This can be an ideal solution for those who want the option of setting up an income stream beginning later in life, at a point when other sources of income may be coming to an end or when there’s a greater need to meet essential expenses—including those that tend to rise, such as healthcare costs.
“Today’s longer life spans mean many investors will need enough money to cover essential expenses through a retirement that may last 30 years or more,” said Cyrus Taraporevala, president of Fidelity Investments Life Insurance Company. “Qualified Longevity Annuity Contracts provide a way for investors to create guaranteed cash flow beginning later in life, while also potentially reducing their current taxes.”
Greater flexibility, greater choice
Although QLAC products are designed for individuals approaching the mandatory MRD age of 70 ½, they can also assist older individuals already taking MRDs. Among the product benefits:
- Provides guaranteed lifetime income later in life. Individuals can set the income start date for whenever they want, up until age 85.
- Complements Social Security. Like Social Security or pension payments, a QLAC provides a consistent guaranteed income stream.
- Helps customize an MRD plan and potentially, tax payments. A QLAC allows an individual the ability to reduce their MRD and potentially, current taxes. The amount invested in a QLAC is excluded from future MRD calculations; meaning taxes aren’t paid until that income starts to be received.
These factors can be quite significant for investors trying to determine whether they’ll have enough funds to last a lifetime. According to a Stanford Study on Longevity2, there’s a 50 percent chance of a 65-year-old man living to age 85—and age 88 for a woman. At the same time, expenses tend to increase as one ages, to address the necessity of covering the increasing costs of items such as prescription drugs, in-home care, and other necessary health care expenses. “Arranging for an additional income stream to ‘kick in’ at a certain point in life can be an effective way to supplement other guaranteed income sources that one comes to depend upon in retirement,” notes Taraporevala.
Looking to Learn More?
For those wondering whether an income annuity might help them achieve their personal vision of retirement, Fidelity offers a guaranteed income estimator, which can help individuals project the guaranteed income stream for a variety of annuity options, along with a variety of other retirement calculators and tools that can help take the guesswork out of saving for retirement and assist in building an income strategy to help meet your unique needs. Additional information on Qualified Longevity Annuity Contracts can be found here. To learn more about annuities and how they can fit into your overall financial plan, visit www.fidelity.com/annuities/overview.
About Fidelity Investments
Fidelity’s goal is to make
financial expertise broadly accessible and effective in helping people
live the lives they want. With assets under administration of $5.3
trillion, including managed assets of $2.1 trillion as of July 31, 2015,
we focus on meeting the unique needs of a diverse set of customers:
helping more than 24 million people invest their own life savings,
nearly 20,000 businesses manage employee benefit programs, as well as
providing nearly 10,000 advisory firms with technology solutions to
invest their own clients’ money. Privately held for nearly 70 years,
Fidelity employs 42,000 associates who are focused on the long-term
success of our customers. For more information about Fidelity
Investments, visit www.fidelity.com/about.
* Guarantees apply to certain insurance and annuity products and are subject to product terms, exclusions and limitations and the insurer's claims paying ability and financial strength.
Deferred Income Annuity contracts are irrevocable, have no cash surrender value and no withdrawals are permitted prior to the income start date.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
Fixed annuities available at Fidelity are issued by third-party insurance companies, which are not affiliated with any Fidelity Investments company. These products are distributed by Fidelity Insurance Agency, Inc., and, for certain products, Fidelity Brokerage Services, Member NYSE, SIPC. A contract's financial guarantees are solely the responsibility of and are subject to the claims-paying ability of the issuing insurance company.
Investing involves risk including the risk of loss.
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Investments and Fidelity are registered service marks of FMR LLC.
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1 NOTE: QLAC premiums from a given funding source cannot exceed 25 percent of the source’s value. The total sum of QLAC premiums cannot exceed $125,000, regardless of funding source.
2 Stanford Study on Longevity, September 2013
