My wife tells me that at the same time every day, my son and dog get antsy and settle down right in front of the door anticipating their "dada" to get home. And when I finally do get home, I'm greeted with giggles, squeals, and licks (the licks coming from my dog, of course). Well, after much anticipation, the qualified longevity annuity contract (QLAC) has come home to Pacific Life. Read more and find out how to prospect for clients that may benefit from this new income solution.
Do you have clients who are in their mid- to late-60s, have IRA assets of at least $500,000, and either 1) are looking for guaranteed income that begins at a later age (85), 2) would like to more efficiently manage their required minimum distributions (RMDs) and, ultimately, taxes, or 3) want to accomplish both of the previously mentioned items? If so, a QLAC might be just the thing to include as an integral part of their retirement income plans.
If you need a refresher on what a QLAC is, then please read my prior blog post titled QLAC: The Retirement Income Planning "Game Changer."
Now, assuming you have come back from my previous blog post with a rejuvenated sense of what a QLAC is, let's talk about which of your clients may be able to effectively utilize a QLAC in a retirement income plan. Here are some key factors to look for when reviewing your book of business for prospects (i.e., "QLAC clients") and an explanation as to why these are the key factors.
Since QLAC assets are not included in your clients' RMD calculations, it is important for your clients to transfer their IRA assets into the QLAC before the first RMD is calculated (12/31 before the year in which he/she attains age 70½). This isn’t to say that clients older or younger than this age couldn’t use a QLAC, however, clients within this age range are ideal for RMD purposes.
After you've narrowed the list by age, look at the clients who have IRA assets (including qualified plans that can be rolled into an IRA) of at least $500,000. This is important for two main reasons:
Finally, and this might not be discovered until you have a discussion with a specific client, the typical client generally fits into one of two (or both) of these categories:
After you've created your list of possible "QLAC clients," contact your Pacific Life wholesaler to discuss the QLAC solutions Pacific Life can offer. You might not be as excited about QLACs as my son and dog are when I come home, but your "QLAC clients" might be when they hear about the opportunity to reduce their RMDs and receive future guaranteed lifetime income.
In order for the contract to be eligible as a QLAC, certain requirements under Treasury Regulations must be met, including limits on the total amount of purchase payments that can be made to the contract. Compliance with the QLAC purchase payments limit is the owner's responsibility, and failure to adhere may result in the contract no longer being considered a QLAC, and would subject the value of the QLAC to required minimum distribution requirements that may not be accessible through the contract. In addition, there are restrictions on annuity payout options that can be elected under a QLAC contract, and the commutation, payment acceleration, and inflation protection features are not available. Changes to marital status may require a change to the annuity payout option and/or payments in order to maintain the QLAC status.
Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.
Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.
Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues.
Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.
No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency