Planning for retirement often focuses on the accumulation of funds before actual retirement. However, there is a concern about whether a retiree will outlive their retirement funds, and retirees wonder how they can lessen the likelihood of this happening.

This concern was heard by the IRS and has resulted in the creation of a qualified longevity annuity contribution (QLAC) in order to help employers solve this issue. This contribution also receives special tax treatment.

When clients ask Nyhart how to help their employees combat the risk of running out of retirement funds, Nyhart recommends a QLAC. This contribution can be a discretionary contribution by the employer and is an age-weighted contribution that is based on mortality and interest rate assumptions. Upon retirement, this amount is to be used to purchase a longevity annuity which specifies a later date at which a guaranteed monthly payout amount will be paid to the retiree for life.

Nyhart has implemented this type of contribution for their employees and has made a contribution based on this concept for the past 3 years in an effort to help their employees combat longevity concerns in retirement.