What Will Be Covered in this Review?
In this review, we will be discussing the following information regarding the American General Life Insurance Company QLAC:
- Product type
- Current rates
- Realistic long-term return expectations
- How it is used
- How it is most poorly used
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If you have been planning for your future retirement income strategy, but you are fearful that you may run out of income while you still need it, the good news is that there are some strategies that may be available to you. One of those is using a deferred income annuity as a QLAC.
Given the uncertain market environment today, there are many people who don’t know where to turn in order to ensure that they will have an ongoing income stream in the future. This is especially the case as our life expectancy is now so much longer than it was just a century ago. Because of this, it is not at all unheard of for people to live for several decades in their retirement years.
One strategy that has become more popular over just the past few years is to use a QLAC – also known as a Qualified Longevity Annuity Contract. In going this route, not only could you receive an income that will last for the remainder of your lifetime (as well as that of your spouse, if applicable), but you could also attain some nice tax-deferral benefit in the meantime.
QLACs are actually a deferred income annuity (or DIA), which is funded with an investment from an IRA (Individual Retirement Account), or another qualified retirement plan such as a 401(k) or 403(b).
Following the great recession of 2008, the IRS okay’ed this strategy as a way of allowing retirees the stability of lifetime income, while at the same time keeping Required Minimum Distribution rules in mind. (These rules, oftentimes referred to as RMD rules, require that you begin taking withdrawals from traditional IRAs and qualified retirement plans when you turn age 70 1/2).
The IRS’s QLAC regulations state that the assets that are held in fixed deferred income annuities (DIAs) that are specifically designated as QLACs, though, are not included in the calculation of one’s required minimum distribution at age 70 1/2.
Therefore, you are able to defer your income payments until you actually need them (up to age 85), which in turn, can allow you to defer tax on the gain in the contract, and have a larger dollar amount of income down the road.
But, prior to going out and setting up your retirement income strategy using a QLAC, there are some additional pieces of information that you need to know – including whether or not the deferred income annuity (DIA) you choose to go with this strategy is the proper fit for you.
This is where the Annuity Gator can help.
Annuity and Retirement Income Planning Information You Can Actually Trust
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It is possible that your present insurance or financial advisor has talked with you about the American General Life Insurance Company QLAC or some other similar product. However, even though you may feel that you are now well informed about how these product work, it is still extremely important that you know more about the entire picture – which includes the good, the bad and the ugly – before you commit what will likely be a large chunk of your retirement savings.
If you want to know more about the American General Life Insurance Company’s QLAC, you are definitely in the right place. In fact, dare we say that our website is the only place that you’ll be able to secure all of the details you need, which includes the good, the bad, and yes even the ugly. This, however, is the only way to make a good, solid decision about whether or not to purchase it.
In order to be perfectly clear here, we want to state for the record that we at Annuity Gator feel that annuities can be good products for some people – as long as they fit in with your overall financial needs and goals.
So, if you are ready to begin, let’s jump in!
The American General Life Insurance Company QLAC at a Glance
|Product Name||American General Life Insurance Company QLAC|
|Issuer||American General Life Insurance Company|
|Type of Product||Qualified Longevity Annuity Contract (QLAC)|
|Phone Number||(800) 445-7862|
Opening Thoughts on the American General Life Insurance Company QLAC
American General Life Insurance Company initially began offering its products more than 160 years ago. Throughout that time period, the company has paid out in excess of $38 billion in claims and it has served more than 13 million customers. The firm is headquartered in New York City, NY.
The company has a long and vast history of providing both insurance and investment products across the U.S. – and it has built up a very wide and strong network of distributors. The mission of American General is to be the “premier provider of protection, investment, and income solutions that are needed for both financial and retirement security.”
This insurance and financial services company is highly committed to providing better and more innovative ways of helping their policyholders and clients protect their savings and financial security. Today, American General Life Insurance is a part of the AIG (American International Group) network.
Because so many people are living longer these days, it is essential to ensure that you have income during your early stages of retirement, as well as many years down the road. In fact, it’s not uncommon for people to live for 20, 30 or more years past their retirement date.
On top of that, over time, the prices of the goods and services you need to buy will also likely continue to rise. So, having a larger amount of income in the future will also be a requirement – at least if you want to continue your present lifestyle.
A financial product such as the American General Life Insurance Company’s QLAC could end up providing you with the ability to extend your savings. By purchasing this product, you can take qualified assets such as those that are in a qualified retirement plan or traditional IRA and defer the distribution of at least a portion of those assets beyond age 70 1/2. Thus, you can reduce your required minimum distribution (RMD) until a later date.
In addition to ensuring that you will have more income later in retirement, you can delay paying taxes on money that you simply do not need earlier in your retirement years, which in turn, can give you the potential to leave more assets for a surviving spouse and/or other heirs.
But, before you sign on the dotted line and commit to this – or any other similar – product, you need to know that it is really the solution to your needs. Otherwise, if you find out too late that it isn’t, you could find that it is a very costly mistake.
Before we get into the in-depth details, we have some legal disclosures to present…
This is an independent annuity product review. It is not a recommendation to purchase or to sell an annuity. American General Life Insurance Company has not endorsed this review in any way, nor do we receive any type of compensation for providing this review. This annuity review is meant solely to be an independent review at the request of our readers so that they may see our perspective when breaking down the positives and the negatives of this particular annuity. Prior to committing to the purchase of any type of insurance and/or investment vehicle, it is critical that you do your own due diligence, and that you also talk with a properly licensed professional if you have any questions that relate to your specific situation. All of the names, materials, and marks that have been used in compiling this annuity review are the property of their respective owners.
For more details on how to compare fixed annuities so that you can decide which may be the best one for you, click here in order to obtain our free annuity report.
How American General Describes Its QLAC Offering
A Qualified Longevity Annuity Contract (QLAC) can offer you some nice tax advantages via a deferred income annuity (DIA). For example, because a QLAC can allow the delay of income withdrawals past age 70 1/2, you can continue to obtain the tax-deferral benefits on your funds that are inside of the account. Also, because you can wait longer – up to age 85 – before you start taking your income payments, the actual dollar amount of your payments will also be larger (i.e., taking income at age 85 as versus almost 15 years earlier).
The American General Life Insurance Company offers the American Pathway Deferred Income Annuity as a single premium deferred income annuity.
With this product, you can deposit a minimum of $20,000 – up to the maximum QLAC amount, which is the lesser of $125,000 or 25% of your aggregated IRA account values. If you use this annuity as a QLAC, then the income distributions must initially begin by the first day of the month following your 85th birthday.
There are several income options available, which include one life or two – provided that the second individual is your spouse. For a full rundown of this annuity, you can check out the product brochure HERE.
How an Insurance or Financial Advisor Might “Pitch” this Product
If you’re like most people, you like to have guarantees – particularly when they have to do with your financial life. If you move forward with the purchase of the American General Life Insurance Company’s QLAC annuity, you can count on an income that will last for the rest of your life, no matter how long that may be.
Given that, it is likely that if you’ve been presented this product by your insurance or financial advisor, he or she focused on the income guarantee, as well as the fact that you can continue to defer your taxable gains for a longer period of time than you otherwise would by keeping funds in a qualified retirement plan and/or a traditional IRA account.
Because income from a QLAC does not need to begin until you are age 85, this can essentially offer nearly 15 extra years of tax deferral – which can definitely add up over time. You can also count on a higher dollar amount of monthly income by waiting a few more years, rather than having to take withdrawals at age 70 1/2 (especially if you really don’t need the money at that time).
Yet, prior to diving in head first with this – or any other – QLAC annuity, it is important that you know the whole story, because there are a few “tradeoffs” that you may need to make in order to attain all of these great benefits.
For example, the promised benefits that QLACs can provide may only be achieved if the rules set by the Internal Revenue Service (IRS) are followed. This means a number of things, such as:
- The deferral of only $125,000 or 25 percent of your qualified assets – whichever is less
- Not being able to use IRA money that is in a Roth, or that is from an inherited IRA
- Depositing the money prior to turning age 82
- Only using a deferred income annuity that qualifies as a QLAC
Also, once you have paid in your premium for a deferred income annuity (DIA) such as the American Pathway Deferred Income Annuity, you will not have future access to these funds, even in the event of an emergency. This means that you need to be sure that you have other sources of income for meeting your short-term expenses, as well as other funds available just in case.
The Annuity Gator’s End Take on the American General Life Insurance Company’s QLAC
Where it works best:
This product may work well for those who:
- Anticipate a longer lifespan
- Want or need an additional source of income later in life
- Wish to continue the tax-advantaged compounding for a longer period of time (up to age 85 as verses 70 1/2)
Where it works the worst:
Alternatively, this product may not fare so well for those who:
- Do not anticipate a long life (i.e., who may already have serious health issues)
- Want or need to start taking income at or before age 70 1/2
- Do not intend to use the lifetime income feature
In order to truly know how to compare the best annuity options for you, click here so that you can download our free annuity report.
If you have been considering the purchase of a DIA (deferred income annuity) as a QLAC, then it is important for you to first have a good understanding of the product, and how it may (or may not) work for you.
If the American General Life Insurance Company QLAC seems to fit in well with your financial needs and goals, you can be sure that you’ll obtain tax advantages, as well as a guaranteed income stream that you cannot outlive – regardless of how long you may need it.
But even so, it is still possible that the QLAC annuity from American General Life Insurance Company still may not fit the bill – and that there very well could be a better option out there for you.
The only way to really know if this product will work well for you is to have it tested, using your particular financial parameters. We can provide this testing for you, and we can offer you a spreadsheet of the results. If you would like to find out more about the American General Life Insurance Company QLAC, then please just let us know and we will run the figures for you.
Have Any Additional Questions on the American General Life Insurance Company QLAC? Did You See Any Mistakes?
We realize that this annuity review went a bit long, so we appreciate you sticking with us thus far here to the end. But, we would rather provide you with a bit “too much” information, rather than not enough. Therefore, if you found this annuity review to be beneficial, please feel free to pass it on and to share it with other people who could also find value in it.
We also understand that, just like with most other financial vehicles, the information on annuities can change frequently. Therefore, if you did happen to notice information in this annuity review that may need to be updated or revised, then please let us know and we will happily make the necessary updates.
And, if this annuity review had caused you to be more confused about how deferred income annuities (DIAs) may be used as QLACs – or, if by reading this review, you were prompted with any additional questions – then please click here and let us know that, too.
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