3-minute article

What is a registered index‑linked annuity and how does it work?

Annuities Retirement planning

Registered index-linked annuities have moved into the mainstream. They are no longer considered an emerging alternative, with more than $85 billion in RILA sales projected for 2026, exceeding record 2025 RILA sales, according to LIMRA. RILAs are now a significant annuity category for financial professionals seeking a middle-risk allocation between fully market-exposed assets and principal-protected solutions.

Is a RILA right for your client? Answer these seven questions.

What is a registered index-linked annuity (RILA)?

A registered index-linked annuity, or RILA, is a registered security that can be used for long-term financial planning, such as retirement. It can help clients accumulate money based in part on the growth of a published market index, while also providing a level of protection from loss if the underlying index declines in value.

How a registered index-linked annuity works

A RILA allows individuals to allocate a portion of their assets to one or more market index options, such as the S&P 500^®, without investing directly in the index. The index change over a set period is measured and applied using the RILA’s crediting rules at the end of that period.

Money is allocated to one or more index-linked crediting strategies, each tied to a specific index and time period — commonly one, three or six years. At the end of that period, the insurer calculates the index’s return and credits the account accordingly, subject to the terms of that strategy, such as a cap, participation rate or spread.

On the downside, a RILA uses a mechanism to help limit losses. The insurer absorbs the first portion of a loss — commonly 10% or 20% — and the client assumes any loss beyond that amount.

Index-linked growth

Segment Credits can be earned based partly on how the underlying index options perform. When the index rises in value, interest credits can be earned based on the parameters of the RILA, increasing its Accumulated Value. With negative index performance, no Segment Credits are earned, but built-in protection helps limit potential losses.

Cap and participation rate

One of two index crediting strategies is generally used to help determine potential growth based in part on how a benchmark index performs.

A cap acts like a ceiling, setting the maximum credits that can be earned during a term when index performance is positive. If the index rises less than the cap, the full index return is generally credited to the contract. If it rises more than the cap, the credited return does not exceed the ceiling.

Cap example

With a 12% cap on a one-year term and a positive index change of 6%, the credited return for that period would be the full 6%. If the index change were 12.5%, the credited return would be 12% — the maximum gain allowed in the segment.

A participation rate determines how much of an index gain is used to calculate a strategy’s return for a given term. For example, a contract with an 80% participation rate and an index change of 20% would result in a 16% credited return. In the case of an uncapped 150% participation strategy and the same 20% index change, the credited return would be 30% — greater than the actual index gain.

Growth is tied to an index

If Participation Rates are over 100% within the RILA contract, clients could earn Segment Credits that may exceed index returns.

Buffers

While caps and participation rates address the upside, buffers address the downside. RILAs are often called buffered annuities because they help absorb a portion of loss while still allowing for gains based on index performance. They may also be referred to as index-linked variable annuities or structured annuities. Index declines that exceed the buffer are assumed by the client.

Understanding Buffer Protection

A Buffer Segment Option provides a level of protection, up to the Buffer Rate, from typical market volatility. The Buffer Rate is a threshold — commonly 10%, 20% or 30% — that represents the percentage of loss a client does not assume. Losses exceeding the Buffer Rate result in a negative Segment Credit and reduce the value of the RILA contract.

Examples of how a 10% buffer may affect losses from negative index performance
Index decline	Buffer Rate	Loss absorbed by insurer	Index-linked loss assumed by client
8%	10%	8%	0%
15%	10%	10%	5%
30%	10%	10%	20%

Negative returns within the Buffer Rate are absorbed by the insurer. Negative returns exceeding the Buffer Rate are absorbed by the client.

For example, suppose a RILA with a 10% buffer experiences an 8% decline in the benchmark index. The entire decline is absorbed by the insurer because it falls within the 10% buffer zone, and the client is protected from the loss.

A decline larger than the 10% buffer would result in an index-linked loss. A 15% index decline minus a 10% buffer would result in a 5% index-linked loss, while a 30% index decline with a 10% buffer would result in a 20% index-linked loss. Both losses are incurred by the client.

Depending on risk tolerance, years until retirement and ever-changing market conditions, finding the right mix of stocks and bonds can be tricky. Discover how RILAs, an increasingly popular product, help address three key retirement risks.

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How RILAs compare to other annuities

Comparison of variable annuities, registered index-linked annuities, fixed indexed annuities and fixed annuities
Feature	Variable annuity	RILA	Fixed indexed annuity	Fixed annuity
Risk level	Highest Funds are invested in subaccounts, putting principal fully at risk.	Moderate Principal is partially at risk. Buffers or floors absorb some losses, but not all.	Low Principal is protected from index losses. There is no downside from market declines.	Lowest Principal is fully protected with a guaranteed fixed rate of return.
Growth potential	Highest Uncapped and directly tracks subaccount performance, both up and down.	High but may be limited Upside is linked to an index and may be limited by a cap, spread or participation rate.	Moderate Upside is tied to an index but may be limited by a cap or participation rate.	Lowest A fixed, predictable rate is set in advance.
Market exposure	Direct Invested in securities with full exposure to market gains and losses.	Indirect Linked in part to index performance, without direct investment, and provides a level of downside protection through a buffer or floor.	Indirect Linked in part to index performance, with protection from losses caused by negative index performance.	None No linkage to markets or indices.

RILA vs. fixed indexed annuity (FIA)

In addition to growth potential based in part on the performance of one or more market indices, both RILAs and FIAs offer tax-deferred growth potential, annual free withdrawal amounts up to a certain limit and an option to convert the annuity into a stream of retirement income payments.

Neither a RILA nor a FIA is a stock market investment, and neither directly participates in stocks or equities. However, with a RILA, clients assume a level of risk due to market loss in exchange for higher growth potential. Another significant difference is that RILAs are registered securities, whereas FIAs are insurance products.

Financial professionals may favor a RILA over a FIA when a client wants meaningfully higher growth potential than a FIA’s caps allow and can accept a defined level of market loss to pursue it. A FIA may be the better fit when a client wants no exposure to losses caused by negative index performance, even a small, buffered loss. A RILA may be the better fit when a client is comfortable trading some downside protection for higher caps, uncapped participation strategies or a broader selection of index options.

RILA vs. variable annuity

When comparing registered index-linked annuities and variable annuities (VAs), RILAs are sometimes described as a cross between a fixed indexed annuity and a variable annuity. While both RILAs and traditional variable annuities are registered securities that can gain or lose value, a RILA links returns to an index with contractual limits on gains and losses.

A variable annuity invests premiums in market-based subaccounts, and its upside is generally not capped. The tradeoff is the potential for higher gains. However, VAs are fully exposed to investment losses without a built-in buffer to help absorb losses.

Who a registered index-linked annuity may be right for

The risk-and-reward balance of a registered index-linked annuity may be right for accumulation-focused clients approaching retirement who:

Want to keep growing their money while maintaining a level of protection on what they have earned
Want growth potential beyond what a fixed indexed annuity offers but are not ready for full market exposure
Can tolerate limited losses and have enough time to recoup lost ground from a downturn — typically a medium-to-long time horizon of six to 10 years
Are comfortable with moderate complexity and have a financial professional who can explain the product
Are accumulating money for retirement and are not yet drawing income

Investing can feel smooth as glass when there is time to ride out the effects of volatile markets. But the closer retirement gets, the less time there is to make up lost ground. For clients with enough time who want some protection from market volatility and growth opportunities, adding a RILA to their retirement portfolio may be the right option. RILAs are typically not recommended for retirees who need income immediately or savers who cannot afford any loss.

How are financial professionals using RILAs in volatile markets?

RILAs are becoming mainstream in retirement portfolios because of their growth potential and level of downside protection. They are being used to help replace uncertainty with defined tradeoffs, address sequence-of-returns risk for clients approaching or entering retirement and help clients limit their exposure to market volatility when they are not ready to move everything into fixed products.

Key features of a RILA

In addition to index-linked growth potential, cap and participation rate strategies and a measure of downside protection, a RILA may include the following features:

Tax-deferred growth

Any interest credited remains tax-deferred until withdrawn. Your clients do not lose part of their growth to taxes each year. When they eventually withdraw their money, clients may pay less in taxes if they are in a lower tax bracket.

Withdrawal flexibility

Annual withdrawals up to a stated amount — for example, 10% of the contract value — without a surrender charge are generally allowed. However, withdrawals may reduce the contract value, Death Benefit and any future income available.

Income conversion options

Clients usually have the option to annuitize the contract and convert its value into a stream of income payments. Although RILAs are typically positioned as accumulation solutions, some offer optional income features.

New RILA features

As demand for registered index-linked annuities continues to grow, providers continue adding new features, such as:

More custom indices
New crediting strategies
Expanded full-protection RILA options, including products with 100% buffers

Frequently asked questions about RILAs

What does a registered index-linked annuity do?

A registered index-linked annuity is a contract with an insurance company in which the account value can move up or down based on the performance of a market index, such as the S&P 500, but with contractual limits on both gains and losses. RILAs are designed for people who want more growth potential than a fully protected product offers and are willing to accept some defined downside risk in exchange for it — often clients approaching retirement who still want growth opportunities without taking on full market exposure.

Are RILAs risky?

RILAs involve some market risk, but built-in downside protection helps limit potential losses compared with direct market investments. Clients can lose money. However, buffers or floors limit a portion of the downside exposure.

What is the difference between a RILA and a fixed indexed annuity?

A RILA allows a client to assume some downside risk in exchange for greater growth potential. A fixed indexed annuity protects the contract value from losses caused by negative index performance but may provide less upside potential.

Who should consider a RILA with Athene?

Clients approaching retirement who want growth potential, do not need immediate income, are willing to accept some downside risk and value a defined level of protection from market losses may want to consider a RILA.

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Guaranteed lifetime income is available through annuitization or an income rider. Income riders may be built into the contract or optional for a charge.

Withdrawals and surrender of taxable amounts are subject to ordinary income tax and, except under certain circumstances, will be subject to an IRS penalty if taken prior to age 59½.

Under current tax law, the Internal Revenue Code already provides tax deferral to qualified money, so there is no additional tax benefit obtained by funding a qualified contract, such as an IRA, with an annuity; consider the other benefits provided by an annuity, such as lifetime income and a Death Benefit.

Indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market indices may not include dividends paid on the underlying stocks and therefore may not reflect the total return of the underlying stocks; neither an index nor any market-indexed annuity is comparable to a direct investment in the equity markets.

Registered index-linked annuities can only be marketed and sold by securities-licensed financial professionals. They have a risk of substantial loss of principal and related earnings. They are designed to be long-term investment products used to help provide income for retirement and are not appropriate as short-term investments.