The Best Ways to Shop for a QLAC

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I was a stockbroker a long time ago with archaic and now defunct firms like Dean Witter and PaineWebber.  For you youngsters out there, those firms are now called Morgan Stanley and UBS.  When I was a young skull full of mush at Dean Witter, that was the time the online stock vendors like Schwab and E*TRADE came on the scene offering low-cost transactions and forever changing the way people invested.

  I remember the Dean Witter VP telling us that this was a fad, and people would still primarily use brokerage firms.  Talk about a horrible prediction!  

I tell you that factual story for a reason.  Annuities and the distribution of annuities are stuck in a 1980s time warp that reminds me of the Dean Witter days.  Eventually, buying annuities will be done on a direct model like most other products, and that day is coming soon.  For now, you will have to put on your leisure suit and disco music when you shop for annuities like the new Qualified Longevity Annuity Contract (QLAC).

QLACs are, in essence, a commodity product.  The QLAC policy is very simplistic, with no moving parts and no annual fees.  You could explain the strategy to a 9-year-old (which is a good thing), and the commission to the selling agent is low.  All of this means that QLACs are pro customer, and this will be the driving force that will make QLACs the #1 annuity in the country by 2020.

  That’s my prediction.  I am Stan The Annuity Man, so I should know!

Contractual Guarantees Only

When shopping for QLACs, you are only going to be shown the contractual guarantees.  That’s all an agent can show you, which is a good thing.

The QLAC goal should be to get the highest contractual payment from the highest rated carrier with the highest COMDEX Ranking (i.e. safest carrier) available.

  Always remember that annuity guarantees are only as good as the company backing them up.  That seems like common sense, but too many agents inappropriately use the state guaranty funds as justification to buy from a substandard company.  

(Click here to find out How to Determine the Safety of an Annuity Carrier)

(Click here to read how State Guaranty Funds work)

Always buy quality when buying an annuity, and that includes a Qualified Longevity Annuity Contract (QLAC).

You can Win with 10

Even though the QLAC Ruling was approved by the IRS and the Treasury Department on July 1st of 2014, the race to the QLAC party has been, and will be slow.  But at the end of the day, there will be around 10 quality carriers that will offer their specific version of the QLAC strategy.

My apologies to agents that are captive, and are only able to offer one or two carriers, but you should look at QLAC quotes from as many carriers as possible.  In my opinion, 4 should be the minimum number of carriers that you should receive quotes from.  However, the most QLAC quotes possible from the most carriers should be the ultimate goal.

Carrier QLAC Customization

Even though QLACs are contractually guaranteed transfer of risk strategies, carriers will differentiate themselves by how they will let you customize the policy.

  Some will offer COLAs (Cost of Living Adjustments), and some will not.  Some carriers will allow you to set up the income stream joint with your spouse, and some will only allow one life on the policy.

(Click here to read about QLACs with COLA Riders)

Start at the QLAC Finish Line

When shopping for a QLAC, always start at the finish line and work backwards to find the contractual solution that fits your specific goal.  Figure out if you want to set up the lifetime income stream with your spouse, or if you want to add a COLA to the policy.  Decide what type of death benefit or other contractual guarantees you want in place.  In other words, be very specific with your agent or advisor about how you want your QLAC structured and shop as many carriers as possible. 

If you start at the QLAC finish line, you will have a winning QLAC policy.

(Click here to find out how to start at the finish line or How to Determine if You Need an Annuity)