CD Comparison Author: Hans Goldstein, NPN 20602398 Last updated: 2026-06-27

CD vs QLAC (2026) - Defer Required Minimum Distributions Legally

TL;DR: A Qualified Longevity Annuity Contract (QLAC) lets you move up to $200,000 of IRA money (2026 limit) into a deferred income annuity that's excluded from Required Minimum Distribution calculations until income starts (no later than age 85). CDs inside an IRA don't defer RMDs - the balance still counts. QLAC is the only legal way to push IRA money's RMD horizon past 73 (now 75).

For retirees with large IRA balances (typically $500K+), RMDs starting at age 73 (rising to 75 under SECURE 2.0) can push them into higher tax brackets and trigger IRMAA Medicare surcharges. The Qualified Longevity Annuity Contract (QLAC) is the only IRS-sanctioned way to remove some of that money from the RMD calculation.

You can move up to $200,000 of IRA money into a QLAC (2026 limit, indexed annually). That premium is excluded from the year-end IRA balance used to calculate RMDs. The QLAC must begin paying income no later than age 85. From that point forward, the income is taxable - but you've delayed it by up to 12 years.

A CD inside an IRA does nothing for RMD calculation. The CD's balance is fully included in the December 31 IRA balance that drives next year's RMD. CDs are a savings instrument; QLACs are a tax-deferral tool.

Side-by-side comparison

Dimension	CD	QLAC
Counts toward RMD calculation	Yes - full balance included	No - excluded from RMD math
Maximum amount	Unlimited	$200,000 per person (2026, indexed)
Latest start date for income	RMDs forced at age 73 (75 by 2033)	Income must start by age 85
Income payout rate (age 80 start, age 65 purchase)	~4.40% interest on principal	~11-13% lifetime payout on original premium
Liquidity	Penalty for early IRA withdrawal	Generally none - QLACs are illiquid by design
Death benefit (before income)	Full balance to IRA beneficiary	Optional return of premium rider; otherwise NOTHING
Death benefit (after income starts)	Remaining balance	Life-only: nothing. Joint-life: spouse continues.
Federal tax	Taxable when withdrawn	Taxable when payments start
State tax	Taxable when withdrawn	Taxable when payments start
Risk	FDIC to $250K	State guaranty fund + carrier A-rating
Best for	IRA money you'll spend before age 73	High-IRA-balance retirees wanting RMD relief

When CDs win

Your IRA balance is under $500,000. RMD impact at 73 is manageable; QLAC's lockup not worth it.
You'll spend down your IRA before age 73. No RMD problem to solve.
You need IRA liquidity. CDs let you take principal at maturity. QLACs lock you up.
You want to leave the IRA to heirs. CDs preserve the balance; QLAC life-only structure pays $0 if you die before income starts.
Your spouse needs IRA money as a surviving-spouse beneficiary. CDs go to beneficiaries; life-only QLACs don't.

When QLAC wins

Your IRA balance is over $1M and RMDs will push you into higher tax brackets at 73. Moving $200K to QLAC reduces RMD-based tax drag for 10+ years.
You're worried about IRMAA Medicare surcharges. Smaller RMDs at 73 mean lower MAGI and lower Medicare premiums.
You have family history of longevity. The QLAC's lifetime income kicks in at 80-85 - exactly when other savings might run thin.
You have a spouse you want to protect. Joint-life QLAC continues income to surviving spouse - lifetime income protection for both lives.
You have ample non-IRA liquidity. Locking $200K of IRA in a QLAC doesn't create cash-flow problems because you have taxable money for liquidity.

Worked example: $250,000 over the planning horizon

You're 65 with $1.2M in an IRA. At 73, RMDs begin at roughly $44,000/year (using the IRS uniform life table divisor). That income, combined with Social Security and pension, pushes you to the 32% federal bracket and into Tier 2 IRMAA. Two strategies:

Option A: Keep $1.2M in IRA CDs (4.40%).
Year 1 RMD at 73: ~$44,000 forced taxable income. Annual IRMAA surcharge: ~$2,500/year. Plus federal/state tax on the RMD: ~$15,000/year.

Option B: Move $200K to QLAC (age 65, income starting at 80), keep $1M in CDs.
Year 1 RMD at 73: ~$36,700 (calculated on $1M balance). Tax + IRMAA savings: ~$3,500/year compared to Option A. At 80, QLAC starts paying ~$26,000/yr lifetime. Total income at 80 = RMD + QLAC + SS = ample, with longevity protection.

The QLAC saves about $24,500 in RMD-driven taxes between ages 73-80, and then provides $26,000/year of lifetime income starting at 80 vs. depleting the IRA. The trade-off: if you die at 75, the QLAC paid nothing (unless you bought ROP rider).

Tax implications

CDs inside an IRA: distributions are fully taxable as ordinary income. RMDs are forced starting age 73 (75 by 2033 under SECURE 2.0).

QLACs: payments are fully taxable as ordinary income when they start. No exclusion ratio (because there's no after-tax basis in a qualified account). The benefit is timing - you've delayed taxable distributions by up to 12 years (age 73 to age 85) on the QLAC portion.

The 2026 QLAC premium cap is $200,000 per person, indexed annually for inflation. The limit applies across all IRAs and 401(k)s in aggregate. Spouses can each fund their own $200,000 QLAC for combined $400,000 of RMD-deferred IRA money.

Frequently Asked Questions

What's the difference between a QLAC and a regular DIA?

A QLAC is a DIA purchased inside an IRA or 401(k) that meets specific IRS requirements: max $200K premium (2026), latest start age 85, no cash surrender value during deferral. The QLAC's special feature is RMD exclusion. A regular DIA outside qualified money has no RMD implications.

Can I buy a QLAC inside a 401(k)?

Yes, if your plan offers QLAC options. Most don't yet. The 2019 SECURE Act broadened QLAC availability inside 401(k)s but adoption has been slow. More common: roll IRA money to a brokerage IRA, then buy QLAC there.

What's the 2026 QLAC limit?

$200,000 per person, indexed for inflation. The 2024 limit was $200,000 (raised from the previous percentage-based cap). For 2026, the dollar limit remains $200,000 (indexed minor adjustments may apply - verify with carrier).

Can I get my premium back if I change my mind?

No, with rare exceptions. QLACs do not allow cash surrender by design - that's part of what makes them qualified. Some carriers offer a 'death benefit only' return-of-premium rider, but during life, the premium is locked.

What happens to my QLAC if I die before payments start?

Depends on the structure: (1) Life-only: nothing paid to beneficiaries. (2) Cash refund rider: original premium refunded to beneficiary (typically reduces payout by 5-15%). (3) Period-certain: any guaranteed payments due during the certain period are paid to beneficiary.

Can my spouse and I each fund a QLAC?

Yes. Each spouse can fund up to $200,000 (2026) from their own IRA. Combined, a couple can move $400,000 of IRA money out of RMD calculations. Joint-life QLACs (one contract with income continuing to surviving spouse) are also available but cost more.

Does the QLAC affect Social Security taxation?

Yes, indirectly. Lower RMDs during ages 73-85 mean lower combined income, which can reduce the portion of Social Security subject to tax. Smaller MAGI also reduces IRMAA surcharges. The combined effect on a high-RMD retiree can be $3,000-$8,000/year in tax savings.

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Hans Goldstein - 213-414-2808 - NPN 20602398, independent licensed insurance producer appointed with multiple A-rated carriers

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Disclosure

This comparison reflects publicly available product information and approximate market yields as of the date stated above. CD, Treasury, bond, annuity, and money market rates change frequently — typically weekly for short-term instruments and monthly for annuities and bonds. Always confirm current values against the most recent issuer disclosure document, FDIC/NCUA insurance status, and the actual contract before purchasing. This article is general information for educational purposes; it is not a personalized recommendation, solicitation, or offer of any specific product. Tax treatment described reflects U.S. federal and state law as of 2026 and is subject to change; consult a qualified tax professional. Hans Goldstein is an independent licensed insurance producer (NPN 20602398, CA Life License #4163961) appointed with multiple A-rated carriers; he does not sell CDs, Treasuries, mutual funds, or securities. No compensation has been received from any carrier or institution in connection with the publication of this comparison. FDIC insurance covers deposits up to $250,000 per depositor, per insured bank, per ownership category. State insurance guaranty fund coverage on annuities varies by state and is typically $250,000-$300,000 per owner per carrier. Past performance does not predict future returns.