This is the Truth Network. Yeah. Welcome to Finishing Well, brought to you by CardinalGuide.com with certified financial planner Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in finishing well, including discussions on managing Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.
Now, let's get started with Finishing Well. Welcome to Finishing Well with certified financial planner Hans Scheil. I always love to learn something new, and today's show I think you're gonna. It's a QLAC. That's a new acronym that I just now learned, which stands for Qualified Longevity Annuity Contract.
That's a mouthful. Wait till you see what it can do for certain people in certain situations. The situations that it usually has to do with the season of life. And in Ecclesiastes 3, it says, to everything there is a season. And this QLAC, which we're going to talk about.
Is recognizing that all not in, you know, all your income is not necessarily need to be taken now. There's a season for those kind of things. And, you know, the government made us do something called required minimum distributions. You got seasons for that, too. And so, God.
gave us seasons in our life, and it's you know, to me it's actually fun and fascinating to watch. how you can do financial planning around these ideas. Of required minimum distributions and things along these lines. And this new idea, this QLAC, man, I'm excited, Hans. Yeah.
Well, it I mean, it's for a specific client. Yeah, and I think that the motivation of most of the people that buy these things. Yeah. RMDs are coming, required minimum distributions. They know they're coming.
They hire us. to try to deal with them to uh minimize them or Pay the taxes or do Roth conversions to lower them. I mean, there's all kinds of so people. Approaching that magic age of 73 or 75 for people that are a little younger. When you get to that point, You got to start pulling money out of your IRA or 401k, and you have to.
You know, there's complicated formulas for that. But you know, it's really the government saying to you, look, Mm-hmm. You've now you're now 73 or you're now 75. You're retired. Or we're going to call you retired.
You haven't taken any of this money or taken very little of it. and you've avoided taxes for all these years.
Now we're going to get our tax money. as we're going to start sending you, you've got to pull out some of it every year.
So, the motivation of a QLAC or a qualified longevity annuity contract. is we can take Some of that IRA money. and we can put it aside. In a Q Act and then is in the QLAC. And then we don't have to take any RMDs.
on that money we put into the QL Act. And then we don't have to take any money out of it. as late we can start the income as late as age 85.
So the example we gave in the video was a gentleman who's 62. Uh his wife is 59. Um He's got... a few million dollars in his IRA. like two and a half million dollars.
Um he He already bought from us. Uh long-term care insurance, bought with IRA money. one of those life annuity hybrids or life long-term peer hybrids. And we already dealt with about three hundred thousand dollars of their money. went into that.
And now he's just looking for ways to reduce his RMDs and get some longevity insurance.
So we fixed him a proposal of $210,000. Um Going, which is the maximum. You can't put any more than $210,000. of his IRA money. He's gonna put in this thing.
It's gonna sit there for 18 years Till he's age 80. and his wife is it will be 78. Um then it's going to start paying them an income. of $4,041 a month. which is almost 50 grand a year, 48,000 in change.
And it's going to pay that for the rest of both of their lives.
So I mean, it's longevity insurance. I mean, he has no idea. if both of them or one of them is going to live past eighty. Um but there's a pretty good chance. But this couple that At least one of them.
um is going to make it there. There's a pretty good chance both of them are going to make it there. And then it becomes a question of how long Are they going to live after that? Nobody knows that. Um I ran the math real quickly.
Um if they buy this They put 210 in now. If she lives to 90, him to 93, They're going to collect back out $662,000. She lives to 95, him 98. That that's either or, by the way.
So only one of them has to live. To that age because the checks keep coming, it's 905,000. And if one of them lives, to a hundred It it's going to be over a million dollars that this thing will pay out on them.
Okay, is that making sense, Robbie? Oh, it's absolutely beautiful. I mean, it's And You know, not to mention that If You know, they Something happens to them, you know, when they're 79 years old, that thing has sat and baked all those years and their heirs are going to get a pretty significant amount too, right? But they are.
So there's a, you know, if neither one of them make it to July 2043. At their death, There's a A death benefit payment that's going to go to them.
Okay. Yeah, you know. I'm going to get in the second part of the show. There's plenty of downsides to this. There's a danger that I've just made this sound beautiful, and it is.
in certain situations, but there's downsides.
So we're we're going to go over those in the Second part of the show. Um But the primary motivation here is this guy sees that he's going to have a lot of money in his IRA. At 73. Or actually it'll be seventy five for him 'cause he's a little younger.
So 75 is a long way off. But he sees his money growing and growing and growing. And then he's going to have a pretty large RMD. starting at 75. And he's looking for ways to reduce that RMD.
He's also looking at the lifetime because this is an inflation protection too.
So if he sets up some other annuities. Um through us. Um which we're recommending to him, because he's going to need income from his thing before from his IRA before sixt before eighty.
So we're going to show him.
some annuities that he can get into where he can have a guaranteed lifetime income. But those things don't grow with inflation.
So this is like a thing sitting there. That just one of them makes it into their 80s or both of them. there's going to be all of a sudden a check that's going to start then. And it's not going to stop until they die. Yeah, it's beautiful.
And that's the beautiful thing about annuities. You know, I have to tell you that my son in law, who is I think he's twenty seven. And he he started listening to our show. And he said, Robbie, this id you know, he says, This idea of annuities, man, this is genius And I said, Yeah, you start them when you're your age and wait and see what happens. Right?
Yeah, it's It's it's significant. Yeah, and I think that his His parents are all of a sudden becoming clients as well. And so That's right. That's right.
Now that I think about it.
So they're listening to the show and they're watching the videos and they're probably talking about it. And then. you know, that's a wonderful thing. And it just where you get the power of you know, time that somebody that's twenty seven might work. It's it's you He can really set, just with a little bit of money going in every year, he can really set himself up.
Um be in a good position when he gets to retirement. Yeah, it's beautiful. Again, that idea of qualified longevity annuity. And so The fact that it's qualified is that the IRS said, Hey, you can take this much money out of your IRA and not have to pay required minimum distributions. That's why that's called what it is.
That's right.
And it's just It's one of the few insurance contracts that's actually you know, like recognized in the tax code. for what it is and A more proper way to do it is This QLAC or Qualified Longevity Annuity Contract is an IRA.
Okay, so what this gentleman would be doing is taking $210,000. out of his IRA. and just moving it to another IRA. that is a qualified longevity annuity contract.
So the money hasn't come out of the IRA, it's just moved from one IRA to another. But this second IRA is not subject to minimum distributions. Because it's that annuity and it's qualified. Yeah, I understand. Yeah.
So everything has downsides. including Q Lax. or a Q lac for this gentleman that we're talking about and his wife.
So You know, let's go over some of the downsides to this. Number one, Is this money illiquid? Once you buy A Q lac. You're not going to say a year or two later, oh, I don't want that anymore. Just let me pull the money out.
No, no. Once you do a QLAC, That money's in there, there's no change in it. and there's no getting a little bit of money out of it. Big red flag there. They're still liquid.
It's irreversible.
So you can't go and say, hey, I wanted that. But now I don't want it anymore. I'd just like to reverse this whole thing. because I don't think I'm going to live that long or whatever. Too bad.
Once you buy this thing. you're hooked into because the insurance company knows that Some couples for some individuals are going to pass away before this thing ever even pays out. And that's why they have a death benefit. It's just so you understand, once you buy one of these, it's irreversible.
So we want to use a lot of caution while we're getting into them. And then The next one is that it has a very conservative interest rate. It's an annuity. And then some people will call these things bad because the interest rate is low. And I think that's going to an extreme.
It's just, it's not going to make you as much money. as you make on your investments, It also isn't going to lose money. in any situation either. It's just And the in interest rate on it It's just very conservative.
So it's not the most exciting kind of investment. And of course, this is a good point to point out that the show is brought to you by Cardinal Guide. And at CardinalGuide.com, fabulous website, it's got the famous seven worries tabs. And one of those worries that we're talking about, I suppose this is under IRAs? This is under the IRA section.
So, if you go to the IRA section, you're going to see a video with the same. QLAC idea and a wonderful video, show notes, all sorts of really helpful resources that go along with that. It's all on the IRA tab there at CardinalGuide.com as well as Hans' book, The Complete Cardinal Guide to Planning for and Living in Retirement, and a workbook to go with that to really help you out. And of course, the easier thing, especially if you're thinking about one of these, I think it's worth having a chat with Hans. And so you just go to the Contact Hans or Tom page and get up with them.
They would love to help you, and they're so easy to talk to.
So when we come back, we're going to talk a lot more about QLAC. Um the how to postpone a portion of your RMD. We'll be right back. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM. a registered investment advisor.
BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. Welcome back to Finishing Well with Certified Financial Planner Hans Scheil, and today's show. QLAC, postpone a portion of your required minimum distribution.
So, Hans? Yeah, so This is just one piece. of a multifaceted strategy. I mean, and and so the the thing I like about it Yeah. We're thinking about the 80s and the 90s.
Is I try to do that with every client that comes in, which typically people showing up in their 60s. A lot of them at their mid sixties. And then You know, we're sitting down and these people that have some resources put together some money in a retirement account, an IRA.
some other savings. Built up their social security check. Most of these people. are going to be fine for the next five Yeah. even fifteen years.
Because they got money there. And it's just they they need us to help them with the taxes and the planning and the planning of Social Security, but By and large, they're going to be fine for the next fifteen years. And what I try to get them focused on. Yes. You know, you may not be fine.
When you're 85 or 90 or 95, you may be a widower or widower. You may be together. Um both of you live a long life. Yeah. You know, money wise, A lot can change, and your ability to manage your money and all that kind of capacity is going to go down.
things can happen in the market.
So I really like to get people focused on What's life going to look like for me? And my family. when I'm in my 80s and 90s. And then That's where we really are adding value to people. And a QLAC.
Her qualified longevity annuity contract feeds right into that. Because it's It's going to set up an income. You don't even have to start the income in a few lakh until 85. I've just shown in my example it's starting at 80. But So this is planning and done through an annuity.
to make sure you have this significant check that doesn't start until you're 80 to 85. And then once it starts, It's guaranteed that it's going to come in. as long as just one of you is alive of a couple. Um so it's for the rest of your life you've got a newfound source of money guaranteed to come in.
So All of that I like on the subject. What I don't like is just taking one type of annuity and just talking about it. And then not putting it with the context of everything else people have and their needs. Um So just understand that this QLAC is a strategy. to postpone some of your RMD or just to move them another 10 years out.
before you have to start drawing on the thing. Um Yeah. This money needs to be in a traditional IRA or a retirement plan. The money where the $210,000 comes out of that, it can't be in a Roth. And there wouldn't be no reason to do this in a raw Um Because The the whole purpose is avoiding or postponing taxation and there is no taxation on raw.
So got to be traditional money. Um The the 2026 QLAC maximum contribution is 210,000. But you could put 100,000 in here.
So you wouldn't have to deal with the same numbers. but we could move some of your money out of the RMD calculation. at 73 or 75. Um The spouse does not need to be 100% benefit. I did that in my example.
But your spouse can be 100% benefit, 75% benefit, or 50% benefit.
So if you die, she lives on. She gets half. instead of the whole thing. you're going to get a little bigger benefit that way. I'm a big fan.
believer in the hundred percent benefit. Because you're going to have Social one of the Social Security checks is going to disappear when the first one of you dies.
So I'd just as soon keep annuity payments. The same. Um So is this all making sense to you, Robbie? Yeah, for a second there, I was wondering what benefit you're talking about. She's not going to get a lump sum of all the money that was in the annuity.
She's going to continue to get the monthly. income. Yeah. And so you have the ability when you're setting this up. to either have the spouse benefit be 100%.
So sh she gets or he, whoever the surviving spouse is, gets the same benefit as the couple got. Or you can make her benefit 75%. Of what? the couple's benefit was. Or you can make her benefit fifty percent of what the couple was getting.
And I'm a fan of the 100% better. Yeah, because what the other portion goes to your heirs then? if you reduce the benefit? No, there isn't any other portion. There's nothing going to the airs out of this.
Then why in the world would you reduce the benefit?
Well, you'd reduce the benefit because you'd make the benefit bigger. You know, as an example. in this this example This guy is 62 now. When he's 80. this four thousand forty one dollar monthly benefit is going to start and it's going to continue until both of them are gone.
Okay, if we made her benefit 50%. His benefit But the couple's benefit might go up to five grand. Oh, I see. I see. I see exactly what you're talking about.
Okay. 'Cause I was like, why in the world would you reduce it? Because sh she's going to get it for the rest of her life, get her as much money as you can get. But what happens is during your lifetime If the way you do it is that way, you enlarge the benefit, which I agree with you, that when you lose that other Social Security check. That's when you're going to need the more money.
Right. And you know, you asked why would you do that?
Well. You would do that to get a bigger monthly benefit, and a lot of pensions are set up that way. I mean, and so insurance companies make pensions, you know, and It just, there's some logic, okay? I mean, I know my dad's was set up that way, is my dad got like. $2,000 a month.
And then as soon as he died, My mom got a thousand a month, and that continued for the rest of her life. It's just the way it was. Yeah. Um It would have been nice if she would have gotten $2,000 a month for the rest of her life. But he probably could have set it up that way.
But he would have then gotten something short of two thousand a month, he would have gotten like $1,800 a month or something like that. And then Um Still, a lot of people. don't find somebody like us. when they make those elections. And again, I'm just going to put in a plug for professional advice.
Is if you're retiring and you got a pension and you got to make pension elections, Get some help. It's it's a very small thing to come in and see us or we do it on zoom and We'll look through all the options and But we'll just figure out what's best for you.
Okay. Yeah, that's important. Yeah. So let's go through some of the pluses. I already went over the negatives at the...
is this prepares for longevity risk.
So If one of you or both of you live a long time, This is going to be smart because you're going to need money in your 80s and 90s. a lot in your nineties if you make it that long. Um And it's just it's longevity risk and it's tied in with inflation risk. Yes. you know, if a dollar is worth a dollar now, Yeah, and what's a dollar gonna be worth in you know, twenty fifty.
It's certainly not going to be a dollar. And having an income that doesn't even start till like 2043. is a is a pretty smart thing. Um or just a small income. should make a big difference at a later age.
Yeah. Protection for your spouse. Yeah. You know, there's plenty of couples where they live the good life when they first retire. And then they have a bed.
Stock market experience, and then all of a sudden. When the you know, when the first one of them passes, There isn't a lot of money left. And I just see that situation and this is a way to protect against that. where at least there'll be an income coming in for her. Um It reduces RMD pressure.
So and that's really the motivation behind a lot of people. Yes. what we call a back-end pension.
So You know, it's a it's you know, most pensions start in your 60s. This is a pension that starts in your 80s. But then once started, it continues for both of your lives. We'll call it a back-end pension. And um You know, it's peace of mind at an advanced age.
It's comforting to just know I know that I get that out of my annuities, is just knowing. If I make it into my eighties and nineties, I know that that check's coming in. out of those annuities that I bought. Um And I also, if I pass away. Um Either before or during that point, and my wife lives on, which I think is a more likely scenario, I know that these things are kicking out checks to her.
until she's gone. Um Uh Yeah, it's just... The annuities with delayed income lifetime payments. have a lot of advantages.
So Yeah, absolutely. You know, they always seem like almost like a miracle thing to me. Like but you don't think about it too much until you start to get Social Security or when you start to really perceive that, wow, I'm going to get this fairly large check for as long as I live. It will never stop and it's a continued income. No matter what.
And when you add an annuity to that, it gives you that sense of you'll never outlive your money. Yeah. And we set up several of these things. on what we call a ladder. You know, and I have mine set up that way that I'm going to start some of them at 73 and then Some of them at 75.
and then some of them at 78 and I'm going to pretty much have them all turned on by 80. But um now this would just continue on that concept. That's how you deal with inflation with annuities. Once again, we've run out of time. Before we ran out of the show, we want to remind you that this show is brought to you by Cardinal Guide and at CardinalGuide.com is an amazing website with the seven worries tabs.
Today's tab is the IRA tab. And if you click on that tab, you're going to find a wonderful video with the same QLAC, a qualified longevity annuity contract. And that has. The show notes that include all sorts of details on these products, as well as the contact and Hans and Tom pages there at cardinalguide.com. And of course, Hans's book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook that goes along with that, which is extremely helpful for you to get a really good base on ideas of how to finish well.
But again, that's from my standpoint. When it comes to these kind of things, setting up pensions, annuities, whatever, and just as Hans described with his ladder, you know, there's a lot of careful planning that could really benefit you in the long run. And I think it's really fun. And I can't imagine not contacting Hans and talk about it because I get to talk about it mine all the time.
So just go to cardinalguide.com and again, click on that Hans and Tom banner. I know you're going to have a good time with all that. Great show, Hans. Yeah, thank you, and God bless you. Any comments regarding safe and secure products and guaranteed income streams?
Screens refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to claims paying ability of the issuing company and are not offered by Brookstone. The opinions expressed by Hans Scheil and guests on this show are their own and do not reflect the opinions of this radio station. All statements and opinions expressed are based upon information considered reliable, although it should not be relied upon as such.
Any statements or opinions are subject to change without notice. Investments involve risk and, unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results. Any strategies mentioned may not be suitable for everyone. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for you.
Before acting on any information mentioned, please consult with a qualified tax or investment advisor to determine if it's suitable for your specific situation. Finishing Well is designed to provide accurate and authoritative information with regard To the subject covered. Investment advisory services offered through Brookstrone Capital Management LLC, abbreviated BCM, a registered investment advisor. BCM and Cardinal Advisors are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.
Cardinal Advisors is not affiliated with or endorsed by the Social Security Administration or any other government agency. We hope you enjoyed Finishing Well, brought to you by CardinalGuide.com. Visit CardinalGuide.com for free downloads of this show or previous shows on topics such as Social Security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Han's best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement and the Workbook. Once again, for dozens of free resources, past shows, or to get Han's book, go to CardinalGuide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word.
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