Recently proposed Treasury regulations would provide an exemption from the current Required Minimum Distribution (RMD) rules at age 70 ½ for certain Qualified Longevity Annuity Contracts (QLACs) selected by participants in IRAs, "defined contribution" plans (such as 401(k) and profit sharing plans), 403(a), 403(b), and governmental 457(b) plans.  The intention is to encourage the choice of a lifetime retirement income option for a portion of our retirement payouts, rather than a lump-sum, in order to provide a hedge against outliving our retirement savings. 

Under these proposed regs, an individual could use up to $100,000 to purchase a QLAC.  The QLAC must be payable over the life of the individual and may include a survivor annuity.  Payments under the lifetime contract must commence no later than age 85, at which time they would become taxable; hence, the exemption or postponement of the normal age 70 ½ RMD. 

The effective date of these regulations is January 1, 2013, or the publication date of the final regs, if later.  So, we'll have more time to study this new QLAC option.  But, it seems it might be an attractive component of a retirement payout strategy and an effective way to postpone the payment of income taxes on retirement income.  More to come...