What is a RILA? A Commonly Used Option for Retirement Savers
When it comes to retirement investing, many people face a dilemma: they want growth that keeps pace with the market, yet they’re wary of losing money in downturns. Enter the Registered Index-Linked Annuity (RILA)—a financial product designed to offer a combination of growth potential and downside features for those nearing retirement.
What Is a RILA?
A RILA is a deferred annuity tied to the performance of a market index—such as the S&P 500—but with built-in protections like caps on gains and buffers against losses. Think of it as a hybrid between two familiar types of annuities:
- Fixed Indexed Annuities (FIA): Provide a guaranteed floor but limit gains.
- Variable Annuities (VA): Offer high growth potential but come with greater risk.
Depending on product design, a RILA may offer different upside and risk characteristics compared with a fixed indexed or variable annuity.
How They Work
RILAs aren’t directly invested in the market. Instead, your returns are determined by the performance of one or more indexes, following rules you choose in advance:
- Cap Rate: Sets the maximum gain you can earn in a term, e.g., 10%.
- Buffer (or Floor): Limits your downside—say, protecting you from the first 10% of losses.
At the end of a term (often 1–6 years), your annuity is credited based on the index’s movement—within your agreed-upon cap or buffer based on predetermined rules that vary by product and strategy.
Why Investors Are Paying Attention
According to LIMRA, RILA sales increased approximately 20% in the first half of 2025, reaching $37 billion, and setting new records for annuity sales overall.
Who Might Benefit from a RILA?
RILAs are often considered by investors who are:
- Nearing retirement and cautious about market dips.
- Seeking tax-deferred growth with potential for better returns than a fixed annuity.
- Comfortable accepting limited losses for the chance at higher gains.
They may also serve as a proxy for more volatile investments, like international stocks, offering index-linked exposure with predefined limits on losses.
What to Consider Before Investing
- Term Length & Strategy
- Choose a strategy term (e.g., 1, 3, or 6 years) and understand the payout rules.
- Cap vs. Buffer Trade-Off
- Higher buffers usually mean lower caps, so adjust based on your outlook.
- Fees & Surrender Charges
- Some RILAs have minimal fees; others may include surrender charges for early withdrawal.
- Liquidity Concerns
- Many RILAs restrict access in early years—make sure you’re comfortable with that.
- Retirement Income Options
- Some RILAs offer riders that convert them into guaranteed lifetime income if desired.
An Example in Practice
Picture Grace, 62, who wants to invest $200,000 in a RILA. She chooses a 3-year term with a 10% cap and a 15% buffer. If the market surges 20%, she earns just 10%—capped. If it drops 12%, she only loses 2%, thanks to the buffer. She gains some growth while minimizing downside risk. That’s the draw of a RILA.
This is a hypothetical example for illustrative purposes only and does not represent the performance of any specific product.
Bottom Line
RILAs are one of several tools investors evaluate. They offer:
- Tax-deferred growth potential
- Downside protection
- Customization
If you’re building a retirement portfolio that needs both growth and guardrails, a RILA could be worth exploring. As always, consult a financial professional to determine if it fits your unique goals and timeline.
Registered Indexed-Linked Annuities are insurance issued by insurance companies, not directly invested in the market, and may result in Gains or losses. Buffers, floors, and cap limit both downside protection and upside potential and vary by product term. RILAs are subject to fees, surrender charges, and the claims paying ability of the issuing insurer.
Evan R. Guido, Senior Wealth Advisor, is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Top Next-Gen Advisors award recipient. Evan heads a team of financial strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 Aksala.com eguido@aksalawealth.com 6260 Lake Osprey Dr. Lakewood Ranch, FL 34240. Securities offered through Cetera Wealth Services, LLC member FINRA/SIPC. Advisory Services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. The views and opinions presented in this article are those of Evan R. Guido and not of Cetera or its subsidiaries. These opinions are based on Evan’s observations and research and are not intended to predict or depict performance of any investment. These views are subject to change based on subsequent developments. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. These views should not be construed as a recommendation to buy or sell any securities and purely for education and entertainment. Past performance does not guarantee future results. The Top Next Gen list includes 250 rising advisors who help manage over $490 billion in client assets. Each advisor was nominated by their firm, then vetted and ranked by SHOOK Research. The rankings, developed by SHOOK Research, are based on an algorithm of qualitative criterion, mostly gained through telephone and in-person due diligence interviews, and quantitative data. Those advisors who are considered have a minimum of four years' experience and the algorithm weighs factors like revenue trends, assets under management, compliance records, industry experience and those that encompass the highest standards of best practices. Portfolio performance is not a criterion due to varying client objectives and lack of audited data. Neither Forbes nor SHOOK receive a fee in exchange for rankings. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.