A RILA, or registered index-linked annuity, ties your growth to a market index the way a fixed index annuity does, but it replaces the 0% floor with partial protection. In return for accepting some losses, you typically get more room to grow.
That makes a RILA the first annuity in this course where a bad year can cost you principal. This lesson shows exactly how much, using the two protection styles you will see in every proposal.
How does a RILA protect you from losses?
Every RILA index option comes with a limit on gains, such as a cap or participation rate, and a limit on losses. The loss limit is usually a buffer or a floor. They sound alike but behave in opposite ways.
- A buffer absorbs the first slice of a loss. With a 10% buffer, the insurer takes the first 10% of a drop and you take the rest.
- A floor caps your total loss. With a 10% floor, you absorb losses up to 10% and the insurer takes everything beyond that.
| Index drop in the term | Your loss with a 10% buffer | Your loss with a 10% floor |
|---|---|---|
| Down 5% | 0% | 5% |
| Down 15% | 5% | 10% |
| Down 30% | 20% | 10% |
A buffer does better in small and medium drops. A floor does better in a crash, because your loss stops at a known number. Ask yourself which scenario keeps you up at night.
Some RILAs use a negative participation rate instead. With 60% negative participation, a 10% index drop costs you 6%.
What is the RILA early withdrawal trap?
Buffers and floors typically apply only at the end of an index term. If you pull money out mid-term, an interim value adjustment may apply instead. That adjustment often ignores the buffer or floor, so you can lose more than the stated protection.
- Ask a specific question. “If I withdraw on day 200 of a 365-day term and the index is down 15%, what is my actual loss?”
- Get the answer in writing. A verbal reassurance is not a contract term.
- Keep other cash on hand. The best defense is never needing to touch a RILA mid-term.
Surrender charges can apply on top of the adjustment during the surrender period. Our explainer on the market value adjustment covers how these formulas work in other annuities too.
The buffer or floor in a RILA brochure usually describes the end of an index term. Before you buy, find out what protection you have on every other day of the term.
Why are RILA sales growing so fast?
RILAs sit between fixed index annuities and variable annuities. They appeal to buyers who want more growth potential than an FIA but cannot stomach a variable annuity’s full market risk.
- Record sales. RILA sales rose 20% in 2025 to a record $79.6 billion, the 11th straight year of growth, according to LIMRA.
- Still climbing. In the first half of 2026, RILA sales reached $44.4 billion, up 21% from a year earlier.
- More disclosure. RILAs are typically registered as securities, so they are regulated by the SEC as well as state insurance departments.
Popular does not mean right for you. Fast growth tells you RILAs are being sold widely, not that they fit every saver.
How do you read a RILA prospectus?
Every RILA comes with a prospectus, and it contains every detail of how your money can move. It is dense, but a few sections answer most of the important questions.
- Index options. The cap or participation rate and the buffer or floor for each index and term length.
- Renewal rules. How long current crediting rates are guaranteed, and the minimum the insurer can reset them to.
- Interim value. The formula used if you withdraw, annuitize or die before a term ends.
- Fees. Any annual contract or rider charges, and whether they come out even in a flat or down year.
Because a RILA is a security, the person selling it must hold a securities registration as well as an insurance license. If they cannot walk you through the prospectus in plain English, slow down. Our overview of what a RILA is has more on how carriers design these options.
- What is the most I could lose in one term, and the most I could lose if I withdrew early?
- What are the caps, participation rates and buffers or floors for each index option?
- How is an early withdrawal adjustment calculated?
- What fees apply, and how do they affect the buffer or floor?
- How long are the current crediting rates guaranteed?
Check your understanding
Five quick questions will show whether buffers and floors make sense to you now.
Lesson 6 quiz: RILAs
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Common questions
Is a RILA better than a fixed index annuity?
Neither is better in general. A RILA usually offers more upside but can lose principal, while an FIA protects principal from index losses and limits gains more tightly.
Does a RILA buffer reset every term?
Typically yes. Each index term starts fresh, so the buffer or floor applies to that term’s result rather than to losses added up across several years.
Can you lose more than the buffer on a RILA?
Yes. A buffer only absorbs the first part of a loss, so a drop larger than the buffer passes the rest to you, and an early withdrawal can expose you to more.
A RILA asks you to accept a defined amount of loss in return for more upside, so know your worst case before you sign. The next lesson covers variable annuities, which drop the RILA’s buffer entirely, and lines up all four annuity types side by side.