Best Registered Index-Linked Annuity (RILA)
If you want to protect your money in retirement, the old-fashioned method of stashing dollar bills in a coffee can or under a mattress isn’t the best idea. It’s crucial to outpace inflation, which a pile of cash won’t do.
- Written by Kate Stalter
- Edited By J.R. Duren
- Published: February 1, 2025
- Updated: February 3, 2025
- 6 min read time
- This page features 2 Cited Research Articles
- Participation rates, caps and buffers vary by RILA contract and affect your returns and protection against losses.
- RILAs provide tax-deferred growth, allowing earnings to compound over time without immediate tax liability.
- You can earn income riders to RILAs for guaranteed payouts over time.
Many retirees turn to a registered index-linked annuity (RILA) to get returns on their investment while knowing that losses are limited. Learn the reasons why we chose Allianz, Lincoln Financial and Nationwide’s RILAs as the best on the market.
What Is a RILA (Registered Index-Linked Annuity)?
A registered index-linked annuity (RILA) is a long-term annuity issued by an insurance company. It’s designed to offer growth while also limiting losses.
RILA returns are linked to the performance of an underlying index, such as the S&P 500 or Nasdaq 100. The index linkage offers the opportunity to capture positive returns, up to a limit, while a buffer protects losses, also up to a limit.
Top Benefits of RILA Annuities
RILAs offer several benefits for retirees, including growth potential, downside protection and tax-deferred savings.
Upside Potential Tied to Index Performance
A key benefit of a RILA is the ability to participate in market gains up to a point. Because RILAs typically have a higher cap rate than fixed or fixed index annuities, they usually offer more growth. “It’s important to note that RILA investors do not receive the dividends paid by the underlying index,” says Michael Rosenberg, managing director at New Jersey-based Diversified Investment Strategies.
Nonetheless, he adds, RILAs are an attractive option for people in or near retirement who want growth potential.
Downside Protection
A RILA’s buffer or floor is an attractive feature for those who prioritize capital preservation. However, account holders still face the risk of losing value if index performance declines more than the buffer or floor’s level of protection.
Tax-Deferred Growth on Earnings
You typically don’t owe taxes on a RILA’s growth until you start making withdrawals. Tax deferral can help build account value over time, as you can take advantage of compounding.
Flexible Design Options
With some RILAs, you can add income riders for guaranteed payouts. Retirees concerned about longevity risk often consider these riders.
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Comparing RILAs to Other Annuities
Understanding how RILAs stack up against fixed, variable and fixed index annuities is important to finding the right fit for your retirement goals.
RILAs vs. Fixed Annuities
RILAs offer higher growth potential but include some risk, while fixed annuities guarantee a set rate. If you value the potential for higher returns, a RILA may be worth considering.
RILAs vs. Variable Annuities
RILAs mitigate downside risk through buffers or floors, unlike variable annuities that expose your investment to full market risk. However, the higher returns that variable annuities might provide may be a good fit if you’re more comfortable with risk and are looking for a long-term annuity solution.
RILAs vs. Fixed Index Annuities (FIAs)
FIAs protect principal entirely but they often cap returns more strictly than RILAs. For example, if your FIA has a 5% rate cap and the stock market index is linked to grow by 10%, your annuity earns no more than 5% interest.
How to Choose the Best RILA for Your Goals
Identify your risk tolerance, contract preferences, and desired riders to select the ideal RILA for your financial future.
Determine Your Risk Tolerance and Growth Expectations
“As retirement approaches, risk aversion typically increases, and protecting accumulated wealth becomes paramount,” says Terry Parham, Jr., co-founder and financial planner at Innovative Wealth Building in Los Angeles.
Consider Contract Length and Liquidity Needs
A RILA contract is in place for a specified length of time, called the crediting term, during which index performance is tracked. These terms typically last between one and six years.
Compare Options for Additional Riders
For an additional fee, you can often purchase a rider that guarantees income. This combines the ability to grow your nest egg with a certain increase in the amount of money you’ll receive.
Review the Insurer’s Financial Ratings and Customer Reviews
Companies such as Moody’s, Standard & Poor’s and Fitch Ratings evaluate insurers’ creditworthiness. These help you gauge an insurer’s financial stability. Also, look for online customer reviews, which can tell you if a company has numerous complaints and criticisms for the same reason.
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Best RILA Providers
Here are some of the best RILA providers and what they offer in terms of features, fees and protections.
Allianz Life
- Downside Protection: Allianz offers buffers and floors to limit your losses. Its Index Advantage+ RILA offers buffers of 10% to 20% or a floor of 10%. Allianz absorbs losses of 10% to 20%, depending on which buffer you choose. If you go with the 10% floor, the most you can lose in a year is 10%.
- Participation Rates and Caps: These determine the percentage of index gain credited to your annuity. Some Allianz prospects have a higher participation rate in exchange for a lower buffer.
- Fees and Costs: Some Allianz RILAs, issued up to age 85, have an annual contract maintenance fee of $50. That’s waived for annuities purchased for $100,000 or more.
For example, an Allianz S&P 500 RILA with a six-year term offers a participation rate of 115% with a buffer of 10%.
Lincoln Financial
- Downside Protection: Lincoln Level Advantage 2 RILAs offer downside protection of 10% and 100%, with those rates dependent upon the participation rate, length of term and any riders purchased.
- Participation Rates and Caps: Some Lincoln have cap rates as high as 250%, depending on the contract purchased. That product, for example, has a 110% participation rate. Other Lincoln RILAs have different rates and caps, depending on factors such as the term length and riders.
- Fees and Costs: Some Lincoln RILAs require an annual fee. These vary depending on the specific product.
Nationwide Mutual Insurance Company
- Downside Protection: The Nationwide Defender Annuity offers 10% and 20% buffers, which protect you against the first 10% or 20%, respectively, of your RILA’s losses.
- Participation Rates and Caps: Nationwide’s Defender Annuity is linked to the S&P 500 offers a 24.5% cap rate with a 100% participation rate and one-year term. Other terms and strategies offer different rates.
- Fees and Costs: Nationwide’s RILA’s have fees. For example, its Defender annuities have a product fee of 1.10%., an annual rate that’s charged quarterly on the annuity’s value.
Frequently Asked Questions About RILAs
Editor Norah Layne contributed to this article.
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2 Cited Research Articles
- Nationwide. (n.d.). Nationwide Defender® Annuity. Retrieved from https://www.nationwide.com/personal/investing/annuities/registered-index-linked/types/defender
- Nationwide. (n.d.). Registered index-linked annuities. Retrieved from https://www.nationwide.com/personal/investing/annuities/registered-index-linked/