What Is a RILA?

A registered index-linked annuity, or RILA, gives you a way to grow your money with some protection from market losses. It sits between a fixed index annuity and a variable annuity, offering more upside potential than fixed products, but with built-in limits on how much you can lose.

If you’re looking for growth but still want a safety net, a RILA can offer that balance.

How a RILA Works

Think of a RILA as an annuity that tracks a market index, like the S&P 500®, but with guardrails you choose to manage both growth and risk. It’s designed to give you market-linked potential without exposing your entire balance to losses.

• When the market goes up, you earn a portion of that growth — up to a cap rate or participation rate set by your contract.
• When the market drops, you’re protected from part of that loss through a buffer or floor you select.

Example: If your RILA has a 10% buffer and the market falls 15%, you’d only absorb a 5% loss. If the market rises 10% and your cap is 8%, you’d earn 8%.

Your returns don’t come from owning the index itself — instead, the insurer credits your account based on how the index performs during a set crediting period (often one or two years). At the end of that period, any gains are locked in and can’t be lost in future downturns. Then, a new term begins with updated rates and protection levels.

Another advantage is that your RILA’s earnings grow tax-deferred, meaning you won’t pay taxes on your gains each year as you would in a taxable investment account. Instead, you pay taxes only when you take withdrawals — typically at your ordinary income rate. This allows your money to compound more efficiently over time, especially for long-term retirement planning.

This flexibility lets you tailor your RILA to your comfort level. And that protection choice (the floor or buffer) is what truly defines how your RILA handles risk.

Floors and Buffers

RILAs give you a rare kind of control where you get to decide how much market loss you’re willing to absorb and how much protection you want from your insurer. This protection choice takes one of two forms: a floor or a buffer.

RILAs use two main protection settings:

Your upside cap usually rises if you accept more downside risk, giving you more growth potential in exchange for less protection.

The Floor: Set a Limit on Losses

A floor caps how much you can lose during a down market. You decide your comfort level, and the insurer absorbs everything beyond that limit.

If you choose a 10% floor:

• A 6% market drop = 6% loss
• A 15% market drop = only 10% loss

The floor creates a boundary for your downside, meaning, you know the most you could lose before you even start. That predictability can make it easier to stay invested through market swings, rather than reacting out of fear.

You’ll usually see lower caps with floors, since your insurer is taking on more of the risk. But for many people nearing retirement, knowing that their savings can’t fall past a set point provides peace of mind that outweighs the tradeoff.

The Buffer: Cushion the First Drop

A buffer protects you from the first portion of a market loss. The insurer absorbs that initial drop, and you take on any loss beyond the buffer amount.

If you choose a 10% buffer:

• A 6% market drop = no loss
• A 20% market drop = 10% loss (the amount beyond your buffer)

This setup provides partial protection, yet enough to mitigate moderate downturns, while maintaining a stronger growth potential than a floor. Because you’re sharing more of the risk, your cap rate is often higher, which means more opportunity when the market performs well.

A buffer can make sense if you’re comfortable taking on some risk in exchange for better growth opportunities, especially if you still have several years before you’ll need income from your annuity.

Who a RILA May Be Right For

RILAs are designed for individuals who want to grow their retirement savings while still seeking a level of protection against market losses. They are suitable for investors who prefer to stay connected to the market, without being fully exposed to it.

A RILA might fit if you:

• Want better growth potential than a fixed annuity but less volatility than a variable annuity
• Have a medium-to-long-term time horizon for retirement income
• Can handle some short-term market movement in exchange for higher upside
• Prefer to decide how much protection you need rather than accept a one-size-fits-all approach

An interesting use of RILAs is as a proxy for a more volatile asset class, like international or emerging market equities. For example, if you have $100k to invest in equities and your desired allocation is 75% US and 25% international. You can invest $75k in US stocks and purchase a $25k RILA indexed to International with a floor or a buffer.

Chip StapletonFINRA Series 7 and Series 66 License Holder

Chip Stapleton is a financial advisor who has spent the past several years of his career working primarily in financial planning and wealth management. He is a FINRA Series 7 and Series 66 license holder and passed the CFA Level II exam in 2022.

RILAs often appeal to people who’ve spent years saving and now want their money to keep working — but safely. They can help bridge the gap between cautious savers and growth-minded investors, giving you more control over both outcomes and emotions during market swings.

It may not be ideal if you need a guaranteed principal or can’t tolerate any loss of value. In that case, a fixed or fixed index annuity may provide more peace of

Real-World Snapshot

Sometimes it helps to see how a RILA works for someone in a real-life situation.

He chooses a RILA with a 10% buffer and a 6% cap.

• In a year when the market gains 9%, Sam earns 6%.
• When the market falls by 8%, his account value remains unchanged. No loss, no panic.

Over time, those steady, limited gains help him stay invested without the stress of watching every market swing. For Sam, the RILA isn’t about chasing big returns; it’s about finding balance between growth and protection so he can retire confidently.

Takeaway: A RILA can be a middle path, offering more opportunities than a fixed annuity and more control than a variable one. It’s designed for savers like Sam who want growth that feels steady, not scary.

RILAs vs. Other Annuities

Feature	Fixed Annuity	Fixed Index Annuity	RILA	Variable Annuity
Risk Level	Low	Low–Moderate	Moderate	High
Linked to Market	No	Yes, limited	Yes, more flexible	Yes, fully
Downside Protection	Full	Full	Partial (buffer or floor)	None
Upside Potential	Limited	Moderate	Higher	Unlimited
Principal Guarantee	Yes	Yes	Partial	No

How Are RILAs Regulated?

RILAs, like other annuities, are insurance contracts, so they are subject to state insurance commission regulations. The states have overarching governance and standardization from the National Association of Insurance Commissioners (NAIC). These regulations are in place to protect consumers, and to ensure annuity providers are only issuing products that meet clients’ financial goals.

While all annuities fall under the oversight of state insurance commissioners, RILAs are also classified as securities. As such,  they are subject to additional regulation by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) and must be sold through licensed broker-dealers.