You may be starting to think about the retired minimum distributions (RMDs) you are required to take once you reach age 70 1/2.  With life expectancies rising, and people living longer and longer, you may be afraid that you might run out of money before you run out of years. 

I know that I want to have a comfortable retirement for as long as I live.  Do you want to have that as well?  With the IRS making you take out money every year from your retirement accounts, have you ever worried about what would happen if you ran out of money?

On July 1, 2014, the IRS released final regulations for a new type of annuity call a qualifying longevity annuity contract (QLAC).  This will allow you to purchase a special type of annuity contract that will allow some of your assets to be excluded from your RMD calculation.

How does a QLAC work and how would it help you?  Here are some of the highlights of the final regulations:

• You will be able to exclude the value of a QLAC from your RMD calculation, allowing you to keep a bigger portion of your IRA/retirement account intact longer.
• You will have to start withdrawing the funds from your QLAC no later than the first day of the month after which you turn age 85.
• You will be limited to investing the lesser of $125,000 or 25% of your applicable retirement account assets for each individual retirement plan.
• You will apply this limit to your prior year-end total of all IRA accounts, for example, excluding Roth IRA accounts, to calculate the amount for your IRA assets.
• You and your spouse will calculate your amount separately based on your plan assets.
• You cannot invest these contracts in variable annuity contracts or equity-indexed annuity contracts.
• You can purchase a contract with cost-of-living adjustments included.
• You cannot get a cash surrender value from this type of contract, so make sure that you will not need to access that lump sum.
• You can opt for death benefits paid over the life of the beneficiary or a return-of-premium option.

Insurance companies are likely to offer products to meet these regulations in the near future, so be on the lookout.