What the HECM? Combine It With a QLAC and See What Happens
Combining a reverse mortgage known as a HECM with a QLAC (qualifying longevity annuity contract) can provide longevity protection, tax savings and liquidity for unplanned expenses.


In a recent article about QLACs, we said, “A QLAC doesn’t make your retirement. It makes it better.”
We offered up several ideas about using a QLAC as part of your plan for retirement income. One was to use a portion of QLAC lifetime payments to pay interest on a reverse mortgage called a HECM, resulting in a combination called HomeEquity2Income, or H2I.
The twofer benefits of a QLAC and a HECM
I’m a numbers guy, and I follow the patter of a former local New York sports broadcaster who used to urge, “Let’s go to the videotape!” for details of the game just played.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.
My primary reason for favoring a combination of a QLAC (qualifying longevity annuity contract) and a HECM (home equity conversion mortgage) is what I call the twofer rule applied to both components.
QLAC twofer:
- Save taxes by deferring distributions from a rollover IRA account until age 85
- Lifetime income, also called longevity protection
HECM twofer:
- Additional tax-free income
- New source of liquidity for unplanned or uninsured expenses
To get an idea of how much income a QLAC can generate, you can get a personalized quote using this QLAC calculator. That income, when combined with a HECM as part of your retirement planning process, can help you achieve your retirement goals:
- Lifetime income
- Liquidity to cover long-term care
- A financial legacy for your heirs
And at the same time, you can defer taxes and lower risk.
Here's the triple play when you combine a QLAC and a HECM: By taking care of longevity protection and using some of that QLAC income to pay HECM interest, you dramatically increase the liquidity to pay for long-term care expenses, which a lot of us will face.
A recent report by Morningstar shows that about 45% of all baby boomers will need long-term care — ranging from in-home services to a nursing home — in retirement. The QLAC-HECM combination in the form of H2I allows you to anticipate a long life and also pay for that LTC.
Now, let’s do the numbers and focus on how the right combination can benefit retirees.
Sally's current situation
Sally, 70, has a traditional IRA worth $1 million invested in a stock-and-bond portfolio. She fully owns her home, which has a value of about $650,000. She’s reevaluating her financial situation, particularly with regard to long-term care expenses.
Sally’s adviser told her that with her income spending starting at around $60,000 per year, the IRA alone should last until age 95 if she is careful. (Unplanned withdrawals would upend that plan.)
Having read our previous articles about the benefits of adding guaranteed lifetime income, she considered adding a single payment immediate annuity (SPIA) contract to reduce the risk of running out of money.
She created a plan with a 30% allocation to a SPIA and a 50/50 split between equities and fixed income for the balance. Under this plan, her starting income increases to $63,500, and her money doesn’t run out.
While the SPIA contract in Sally’s plan went a long way to address the “don’t run out of money” issue, she recognized that the only liquid assets would be her rollover IRA account, which she might need for planned and unplanned expenses.
Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.
Her liquid IRA account, starting at $1 million, didn’t run out, as she found out when she “tested” the plan, but it wasn’t adequate to pay for any substantial amount of unplanned or uninsured expenses.
She needs more help in adding liquidity to her plan, especially because when she takes money out of the IRA to pay for those expenses, her remaining savings will produce even less income.
Adding the H2I strategy to her retirement plan
Sally realizes her home is a valuable asset and that she can consider it as a way to ensure her money not only lasts for her lifetime, but also provides a resource for unplanned expenses.
She could simply apply for a reverse mortgage in the form of a federally endorsed HECM that provides not only access to cash but also an increasing line of credit during the life of the loan.
However, the H2I combination provides even greater benefits. That’s because if she converts some of her IRA savings to a QLAC, a form of deferred income annuity, she can use a portion of that income to pay interest on the HECM and preserve more of her liquidity and her ability to leave a legacy to heirs.
The charts demonstrate how H2I can bolster spendable income while providing access to a HECM line of credit that can finance large unplanned expenses after age 85.
Her total liquid savings under this plan reach $968,000 at age 90. And she can draw on it without tax if it comes from an H2I line of credit.
A simple explanation of advantages
Some of you may be skeptical about the benefits that a QLAC and then a HECM can offer together. Here’s a simple description of what you saw above:
1. A HECM taps into the “largest savings source” of retirees (your house, per experts):
- Tax-free cash flow until age 85 from HECM drawdowns
- Finds the liquidity missing from many plans
2. A QLAC provides longevity protection in two ways:
- Increases your guaranteed lifetime income
- Pays a portion of HECM interest after 85 to grow liquidity and legacy
3. A QLAC and a HECM together provide increases in income and liquidity
4. Importantly, that liquidity from a HECM comes without income taxes
And none of the above is subject to today’s stock and bond market volatility.
Visit Go2Income to order a Go2Income plan that with H2I inside can meet more of your retirement objectives. A Go2Specialist can answer questions about the plan or refer you to a qualified adviser.
Related Content
- Transform Your Retirement Plan With This Powerful Combo
- How Combining Your Home Equity and IRA Can Supercharge Your Retirement
- Is Your Retirement Solution Hiding in Plain Sight?
- How Your Home Can Fill Gaps in Your Retirement Plan
- Would a Reverse Mortgage Work for You in a Gray Divorce?
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
Potential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid Off
Life insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.
-
721 UPREIT DSTs: Real Estate Investing Expert Explores the Hidden Risks
Potential investors need to understand the crucial distinction between a REIT's option to buy a Delaware statutory trust's property and its obligation.
-
I'm an Insurance Expert: Yes, You Need Life Insurance Even if the Kids Are Grown and the House Is Paid Off
Life insurance isn't about you. It's about providing for loved ones and covering expenses after you're gone. Here are five key reasons to have it.
-
Stock Market Today: Tesla Drags on Stocks Amid Musk-Trump Feud
Sentiment has soured between President Trump and his once-loyal ally, Tesla CEO Elon Musk.
-
I'm 60 With a $4.2 Million Nest Egg. Can I Stop Saving and Start Spending Until I Retire at 65?
Should I continue contributing to my 401(k) or treat myself now?
-
These Jobs Reduce Your Alzheimer's Risk: How You Can Benefit
Two jobs are linked to a lower Alzheimer's risk. Even if you do a different kind of work or are retired, these jobs show how to keep your mind sharp.
-
My Professional Advice: When It Comes to Money, You Do You
This is how embracing the 'letting others be' and 'learning to surrender' mindsets can improve your relationship with money.
-
Direct Indexing Expert Explains How It Can Be a Smarter Way to Invest
Direct indexing provides a more efficient approach to investing that can boost after-tax returns, but is it right for you?
-
Five Smart Moves for Retirement Healthcare: From HSAs to Medigap Policies
Unchecked health care costs in retirement could blow a hole in your savings. Here’s how to avoid that.