What Is a RILA? Registered Index-Linked Annuities Explained

Registered index-linked annuities, commonly known as RILAs, have become one of the fastest-growing segments of the annuity market. Annual RILA sales surpassed $58 billion in recent years, and the category continues to attract investors who want a middle ground between the safety of fixed annuities and the growth potential of variable annuities. Yet despite their popularity, RILAs remain one of the most misunderstood retirement products available.

This guide explains what a RILA is, how buffers and caps work, how RILAs compare to other annuity types, and who they are best suited for. This article is for educational purposes only and does not constitute investment or financial advice. Consult a qualified financial advisor before making decisions about annuities or other financial products.

What Is a RILA?

A registered index-linked annuity is a type of deferred annuity that ties your returns to the performance of a market index, such as the S&P 500, while providing a defined level of downside protection. RILAs are also called buffered annuities, structured annuities, or index-variable annuities. The term "registered" means these products are registered with the Securities and Exchange Commission (SEC) as securities, unlike fixed indexed annuities which are regulated solely by state insurance departments.

The core concept behind a RILA is a trade-off. You accept the possibility of some investment loss in exchange for higher potential gains than you would receive from a fully protected product like a fixed indexed annuity. The insurance company absorbs a portion of any market downturn through a buffer or floor mechanism, while your upside is limited by a cap rate, a participation rate, or both.

Because RILAs are securities, the person selling you a RILA must hold both a state insurance license and a securities license (FINRA Series 6 or Series 7). You will receive a prospectus before purchase, which details the product's terms, fees, risks, and crediting methods.

How RILAs Work: The Basic Mechanics

When you purchase a RILA, you choose a crediting strategy that includes several key components: the index your returns are linked to, the term length (typically one, three, or six years), the type and level of downside protection, and the cap or participation rate that limits your upside. At the end of each term, the insurance company calculates the index's performance and applies the buffer and cap to determine what is credited to your account.

Here is a simplified example. Suppose you choose a one-year term linked to the S&P 500 with a 10 percent buffer and a 15 percent cap. If the index gains 12 percent over the year, you would be credited 12 percent because the gain falls below the cap. If the index gains 20 percent, you would be credited only 15 percent, the cap. If the index loses 7 percent, you would lose nothing because the 10 percent buffer absorbs the entire loss. But if the index loses 25 percent, the buffer absorbs the first 10 percent and you would bear the remaining 15 percent loss.

It is important to understand that the buffer and cap are determined at the beginning of each term and are typically locked in for that term's duration. When the term renews, the insurance company may adjust the cap or participation rate based on current market conditions. This means the terms you receive in year one may differ from those you receive in subsequent years.

Buffer vs. Floor Protection: Understanding the Difference

RILAs offer two primary types of downside protection, and they work very differently. Understanding the distinction is critical before choosing a RILA strategy.

Buffer Protection

A buffer absorbs the first portion of any index loss. Common buffer levels are 10 percent, 15 percent, and 20 percent. With a 10 percent buffer, the insurer absorbs the first 10 percentage points of loss. If the index falls 8 percent, you lose nothing. If the index falls 30 percent, you lose 20 percent because the buffer covered the first 10 percentage points. Buffers protect you from moderate downturns but leave you exposed to severe declines beyond the buffer level.

Floor Protection

A floor sets the maximum amount you can lose, regardless of how far the index drops. With a negative 10 percent floor, the most you can lose in any term is 10 percent, even if the index falls 40 percent. However, you bear all losses up to that floor. If the index drops 5 percent, you lose 5 percent. If it drops 30 percent, you still only lose 10 percent. Floors offer protection against catastrophic losses but do not shield you from smaller declines the way buffers do.

Choosing Between Buffer and Floor

The right choice depends on what type of market scenario concerns you most. If you are most worried about moderate, frequent downturns, a buffer may be more suitable because it absorbs losses from the first dollar. If you are more concerned about rare but severe market crashes, a floor may be preferable because it puts a hard limit on your maximum loss. Generally, strategies with floors offer higher caps than comparable buffer strategies because the investor assumes more day-to-day risk.

Caps, Participation Rates, and Crediting Methods

In exchange for providing downside protection, the insurance company limits how much you can earn when the index performs well. Understanding the specific limitations is essential for setting realistic expectations.

• Cap rate. The cap is the maximum return you can earn in a given term. If your cap is 15 percent and the index gains 25 percent, you receive 15 percent. Caps on RILAs are typically higher than those on fixed indexed annuities due to the shared downside risk. As of early 2026, RILA caps commonly range from 10 to 25 percent or higher depending on the term length, index, and protection level chosen.
• Participation rate. The participation rate determines what percentage of the index gain is credited to your annuity. A 100 percent participation rate with no cap means you receive the full index return. Some RILA strategies offer uncapped participation rates in the range of 80 to 150 percent, depending on the index and protection level. A participation rate above 100 percent means you could earn more than the index itself.
• Spread or fee. Some strategies apply a spread, which is a fixed percentage subtracted from the index gain. If the index earns 12 percent and the spread is 2 percent, you receive 10 percent. Spreads are common in strategies that do not have a hard cap, giving you unlimited upside minus the spread.

Most RILAs allow you to allocate your premium across multiple crediting strategies, mixing and matching different indexes, term lengths, and protection levels within the same contract. This flexibility lets you build a diversified allocation within a single annuity.

How RILAs Compare to Other Annuity Types

RILAs sit on a risk-and-return spectrum between fixed indexed annuities and variable annuities. Understanding where they fall relative to other products helps clarify whether a RILA is the right fit. For a broader comparison of annuity categories, see our guide on fixed vs. variable vs. indexed annuities.

RILA vs. Fixed Indexed Annuity (FIA)

A fixed indexed annuity guarantees your principal is fully protected from market losses. The worst that can happen in a down market is that you earn zero for that period. In exchange, FIA caps are generally lower, often in the range of 4 to 10 percent for one-year strategies. A RILA sacrifices some of that principal protection to offer significantly higher caps and participation rates. FIAs are regulated as insurance products by state departments of insurance, while RILAs are regulated as securities by the SEC and FINRA.

RILA vs. Variable Annuity

A variable annuity invests your money directly in sub-accounts similar to mutual funds. There is no buffer, floor, or cap. Your gains and losses are determined entirely by the performance of the sub-accounts you select, minus fees. Variable annuities offer unlimited upside potential but also unlimited downside risk. Fees on variable annuities, including mortality and expense charges, fund management fees, and optional rider fees, often total 2 to 3 percent per year or more. RILAs generally have lower explicit annual fees because the cost of the product is embedded in the cap and buffer structure rather than charged as ongoing percentage-based fees.

RILA vs. Fixed Annuity

A traditional fixed annuity or multi-year guaranteed annuity (MYGA) pays a guaranteed interest rate for a set period. There is no index linkage, no buffer needed, and no cap. Your return is known in advance. Fixed annuities are the simplest and safest option, but the guaranteed rate may not keep pace with inflation over the long term. A RILA offers the potential for meaningfully higher returns in exchange for accepting some market risk.

Advantages of RILAs

RILAs offer several potential benefits that have driven their rapid growth in the annuity market.

• Market participation with downside protection. RILAs let you participate in stock market gains while limiting your exposure to losses. The buffer or floor creates a defined layer of protection that can help you stay invested through volatile periods without suffering full market declines.
• Higher caps and participation rates than FIAs. Because you are sharing more of the downside risk with the insurer, RILA crediting rates are typically more generous than those offered by fixed indexed annuities. Some uncapped RILA strategies offer participation rates above 100 percent, meaning you could earn more than the index return.
• Tax-deferred growth. Like other non-qualified deferred annuities, gains in a RILA are not taxed until you withdraw them. This allows your money to compound without annual tax drag, which can be a significant advantage for investors in higher tax brackets.
• Lower explicit fees than variable annuities. Most RILAs do not charge annual mortality and expense fees or fund management fees. The cost of the product is built into the cap and buffer structure. This can result in a lower total cost of ownership compared to a traditional variable annuity, though the implicit costs embedded in the caps still exist.
• Customizable risk profiles. RILAs allow you to select from multiple strategies with different indexes, term lengths, and protection levels. You can tailor the product to your specific risk tolerance, blending conservative and growth-oriented strategies within a single contract.
• SEC registration provides transparency. Because RILAs are registered securities, the insurer must provide a prospectus that details the product's terms, fees, risks, and performance scenarios. This level of disclosure exceeds what is required for non-registered insurance products like fixed indexed annuities.

Disadvantages and Risks of RILAs

Despite their benefits, RILAs have significant drawbacks that every potential buyer should understand. For more on annuity cost structures, see our detailed breakdown of annuity fees explained.

• You can still lose money. Unlike a fixed annuity or FIA, a RILA does not guarantee your principal. In a severe market downturn that exceeds your buffer, you will suffer real losses. In theory, with a 10 percent buffer, a 50 percent market decline would result in a 40 percent loss to your account for that term.
• Caps limit your gains. When the market has a strong year, you will not capture the full gain. If the S&P 500 returns 30 percent and your cap is 15 percent, you miss out on 15 percentage points of growth. Over time, capped returns can meaningfully underperform a fully invested portfolio during sustained bull markets.
• Complexity. RILAs are among the most complex annuity products available. Choosing among multiple indexes, term lengths, buffer levels, cap rates, participation rates, and crediting methods requires a level of financial literacy that not all investors possess. The interaction between these features can be difficult to evaluate without professional guidance.
• Surrender charges and illiquidity. Most RILAs impose surrender charges for six to ten years. If you need to access your funds beyond the free withdrawal allowance during this period, you will pay a penalty. This makes RILAs unsuitable for money you may need in the near term.
• Caps can change at renewal. While caps are locked in for each term, the insurer can adjust them when a new term begins. If interest rates fall or market conditions change, you may receive a lower cap at renewal than you had initially. There is no guarantee that future caps will be as attractive as the ones offered at purchase.
• No dividends. RILAs are linked to the price return of an index, not its total return. This means you do not receive the dividends that the index's underlying stocks pay, which historically have accounted for roughly 1.5 to 2 percent of the S&P 500's annual return. This is an often-overlooked drag on performance.
• Ordinary income tax treatment. Gains withdrawn from a RILA are taxed as ordinary income, not at the more favorable long-term capital gains rate. For investors in higher tax brackets, this can significantly reduce after-tax returns compared to holding index funds in a taxable brokerage account.

Who Is a RILA Best Suited For?

RILAs are not for everyone. They occupy a specific niche that works well for certain investor profiles but poorly for others. If you are still evaluating whether an annuity of any type belongs in your portfolio, start with our guide on whether annuities are worth it.

A RILA may be a good fit if you meet most of the following criteria:

• You have a moderate risk tolerance and want some market exposure but cannot stomach full market volatility.
• You are within 5 to 15 years of retirement or already retired with other sources of guaranteed income covering your essential expenses.
• You want higher growth potential than fixed annuities or CDs provide but find variable annuity fees and risk unacceptable.
• You will not need full access to the money during the surrender period, typically six to ten years.
• You are comfortable understanding the trade-offs between buffers, caps, and participation rates, or you are working with a financial advisor who can explain them.

A RILA is likely not appropriate if you cannot afford to lose any principal, need immediate liquidity, want a guaranteed fixed return, or prefer the simplicity of a straightforward fixed annuity or MYGA.

Major RILA Providers

Several large insurance companies dominate the RILA market. Each offers products with different features, buffer levels, index options, and term lengths. The following are among the most prominent RILA providers as of 2026.

1. Allianz. Allianz is one of the largest sellers of indexed and structured annuities in the United States. Its RILA offerings include the Allianz Index Advantage series, which provides multiple index options, buffer levels of 10 and 20 percent, and both capped and uncapped crediting strategies. Allianz is known for offering competitive participation rates.
2. Lincoln Financial. Lincoln Financial offers the Lincoln Level Advantage series, one of the original RILA products on the market. It provides buffer options of 10, 15, and 20 percent across one-year and six-year terms. Lincoln's product is known for offering floor protection as well as buffer protection, giving investors more choices in how they manage downside risk.
3. Prudential. Prudential offers the FlexGuard series, which has been among the best-selling RILA products since its launch. FlexGuard provides buffer levels of 10 and 20 percent, multiple index choices, and one-year and six-year term options. Prudential's strong financial strength ratings provide an additional layer of confidence for buyers.
4. Athene. Athene offers the Athene Amplify series, which features both buffer and floor protection options. Athene has grown rapidly in the annuity market and is backed by Apollo Global Management. Its RILA products are known for competitive cap rates and a variety of index crediting strategies, including options linked to proprietary volatility-controlled indexes.

Other notable RILA providers include Brighthouse Financial, AIG, Equitable (formerly AXA), and Nationwide. When comparing providers, focus on financial strength ratings, available indexes, buffer and floor options, cap and participation rates, surrender charge schedules, and the overall flexibility of the product.

How RILA Fees and Costs Work

One of the most common questions about RILAs is whether they charge fees. The answer is nuanced. Most base RILA contracts do not charge explicit annual fees like the mortality and expense charges found in variable annuities. Instead, the insurer's costs and profit margin are embedded in the spread between what the index actually earns and what you receive after the cap or participation rate is applied.

However, there are still costs to be aware of:

• Surrender charges. Most RILAs impose surrender charges for six to ten years if you withdraw more than the free allowance, typically 10 percent per year.
• Optional rider fees. If you add optional benefits like a guaranteed lifetime withdrawal benefit (GLWB), the rider fee is typically charged as an annual percentage of your account value, often ranging from 0.50 to 1.50 percent per year. Adding a rider will also generally reduce your available caps.
• Implicit cap drag. The cap itself represents a cost. In a year when the S&P 500 returns 25 percent and your cap is 15 percent, you have effectively given up 10 percentage points of return. Over multiple years of strong market performance, this opportunity cost can be substantial.

RILA Tax Considerations

RILAs are taxed the same way as other non-qualified deferred annuities. Your investment grows tax-deferred, meaning you owe no income tax on gains until you take a distribution. When you withdraw money, the earnings portion is taxed as ordinary income at your marginal tax rate, which may be higher than the long-term capital gains rate you would pay on investments held in a taxable brokerage account. Withdrawals before age 59 and a half may also trigger a 10 percent IRS early withdrawal penalty on the earnings portion. For a complete overview of annuity taxation rules, read our guide on how annuities are taxed.

If you purchase a RILA inside a qualified retirement account such as a traditional IRA or Roth IRA, the tax treatment follows the rules of the account, not the annuity. In a traditional IRA, distributions are taxed as ordinary income. In a Roth IRA, qualified distributions are tax-free. However, financial advisors generally caution against placing an annuity inside a tax-advantaged account because the annuity's built-in tax deferral is redundant and may come with higher costs than simpler investment options.

How to Evaluate a RILA Before Buying

Before committing to a RILA, take the following steps to ensure the product is appropriate for your financial situation.

1. Read the prospectus. Because RILAs are registered securities, you will receive a prospectus. Read it carefully. It contains detailed information about fees, risks, crediting strategies, surrender charges, and the insurer's financial condition.
2. Understand the buffer or floor. Know exactly how much loss protection you have and what happens if the index drops beyond that level. Run through worst-case scenarios so you know the maximum loss you could experience in a single term.
3. Compare cap rates and participation rates. Look at what different insurers are offering for similar indexes, term lengths, and protection levels. Even small differences in cap rates can compound into significant differences over time.
4. Check the insurer's financial strength. Your RILA is only as strong as the company backing it. Look for insurers with AM Best ratings of A or higher. Check ratings from multiple agencies including Moody's and Standard and Poor's.
5. Review the surrender schedule. Understand how long the surrender period lasts, what the charges are each year, and how much you can withdraw annually without penalty.
6. Work with a qualified advisor. Given the complexity of RILAs, working with a financial advisor who has experience with structured annuities is highly recommended. They can help you evaluate whether a RILA fits within your overall retirement income strategy and compare it with alternatives.

Why RILA Sales Are Growing So Rapidly

RILA sales have grown dramatically over the past several years, surpassing $58 billion in annual sales and making them the fastest-growing annuity segment by a wide margin. Several factors are driving this growth.

First, market volatility has made investors more aware of downside risk. After experiencing sharp market declines in recent years, many pre-retirees and retirees want market participation but with a safety net. RILAs offer exactly that combination. Second, the higher cap rates available on RILAs compared to fixed indexed annuities make them more appealing to investors who want meaningful growth potential. Third, the lower explicit fee structure compared to variable annuities resonates with cost-conscious investors who have become more fee-aware. Finally, the insurance industry has invested heavily in educating financial advisors about RILAs, leading to more advisors recommending them as a portfolio tool.

How a RILA Fits Into a Retirement Portfolio

Financial advisors who recommend RILAs typically position them as one component of a broader retirement income strategy, not as the entire plan. A common approach is to use guaranteed income sources like Social Security, pensions, and fixed annuities to cover essential living expenses, then allocate a portion of remaining assets to a RILA for growth potential with managed risk. For more guidance on building a retirement income strategy with annuities, see our article on the best annuities for retirement income.

A RILA can serve a similar portfolio role to a balanced or moderate-allocation fund, providing equity-like upside with a defined downside limit. Some advisors use RILAs to replace a portion of the bond allocation in a portfolio, arguing that a RILA with a strong buffer offers better growth potential than bonds while still limiting downside risk. Others use RILAs to replace a portion of the equity allocation for clients who are too anxious to remain fully invested in stocks.

The key principle is that a RILA should complement your other holdings, not replace them entirely. A well-diversified retirement plan may include a mix of guaranteed income, growth-oriented investments, liquid reserves, and a RILA for moderate growth with downside cushioning.

The Bottom Line on RILAs

Registered index-linked annuities fill a genuine gap in the retirement product landscape. They offer more growth potential than fixed indexed annuities, more downside protection than variable annuities, and a level of customization that appeals to investors with moderate risk tolerance. The combination of buffer protection, market-linked returns, and tax deferral has made RILAs the fastest-growing annuity category in the United States.

However, RILAs are complex products that require careful evaluation. Caps limit your upside, buffers do not eliminate all risk, surrender charges restrict your liquidity, and gains are taxed as ordinary income. They are best suited for investors who have a clear understanding of the trade-offs, a long enough time horizon to ride out a surrender period, and enough guaranteed income from other sources to cover essential expenses.

Before purchasing a RILA, read the prospectus thoroughly, compare products from multiple providers, understand the worst-case loss scenarios, and work with a qualified financial advisor who can place the product in the context of your complete financial picture. When used appropriately, a RILA can be a valuable tool for building a more resilient retirement portfolio.