What is a deferred income annuity or QLAC and how does it work?

A deferred income annuity is one you buy now but that starts paying years later, often in your late 70s or 80s. A Qualified Longevity Annuity Contract, or QLAC, is a special version funded with IRA or 401(k) money that the IRS allows you to exclude from the balance used to calculate required minimum distributions, up to a dollar limit the IRS adjusts annually. The idea is to spend a modest slice of savings today to guarantee income in advanced old age, hedging the risk of living far longer than expected. Because payments start later, each dollar buys a larger future income than an immediate annuity, but you must live long enough to benefit.