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  • 5-Minute Article
  • |
  • Apr 23, 2024

How to Build a Registered Index-Linked Annuity That Works for You

RILAs offer choices that could help you reach your financial goals.

Questions this article can help you answer:
  • What are some decisions to make when considering a registered index-linked annuity (RILA)?
  • Are there any statistics about the historical performance of RILAs?
  • What are some common indices that RILAs can track?

Adding a registered index-linked annuity (RILA) to your portfolio can provide a level of downside protection while allowing you to participate in market growth opportunities that may help you reach your financial goals. You can choose from options to customize a RILA (also known as a buffered annuity) to fit your individual needs and risk tolerance. In addition to helping you determine how much of your portfolio could be allocated to a RILA, a financial professional can help you select the options that work best for you.

How to Customize Your RILA

Below are some factors to consider when working with a financial professional. For information on some of the key words and phrases found in this article, view our RILA dictionary.

How to Customize Your RILA

What Happens Next?
 

After selecting the term, level of protection, and index associated with a RILA, you should also consider the crediting strategy. Depending on the chosen crediting strategy, your account value may be credited based on the performance of the selected index. A Cap Rate crediting strategy is the maximum rate that can be earned at the end of the term based on index performance. For example, if the Cap Rate is 100% and the index value is up 75% at the end of the term, the account value would increase by 75%. If the index is up more than 100%, the account value would increase by 100%. Some companies may offer other crediting strategies such as Step Rate or Participation Rate.

How to Customize Your RILA

History Shows the Potential Effectiveness of a RILA
 

While no one can guarantee the performance of the market over a given period of time, historically speaking, the average return on a rolling monthly basis with a 6-year term for the S&P 500 Index from January 1957 through December 2022 was 58.8%.1 For example, if you owned a RILA tracking the S&P 500 Index with a 6-year term and a Cap Rate of 200%, and the index value was up 58.8% at the end of the term, your account value would be credited the full 58.8%. If your Cap Rate with the same RILA was 50%, your account would be credited with a 50% increase in value. In addition, analysis of data over the same time period shows that the owner of a RILA contract with a 25% buffer and a 6-year term would have avoided losses 99.2% of the time.1

Choosing a RILA for a portion of your portfolio may provide you with the opportunity to retain exposure to growth in the equity market with a level of protection built in. The level of protection offered by a RILA may help you stay invested for the long term, knowing that you can better withstand the highs and lows of volatile or even down markets. A financial professional can help explain how the choices you make to customize a RILA could impact the potential exposure to gains or losses during the term.

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Prospectuses

A The S&P 500® is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by Brighthouse Financial, Inc. S&P®, S&P 500®, US 500, The 500, iBoxx®, iTraxx® and CDX® are trademarks of S&P Global, Inc. or its affiliates (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Brighthouse Financial, Inc. Brighthouse Financial products are not sponsored, endorsed, sold, or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates; and none of such parties make any representation regarding the advisability of investing in such products, nor do they have any liability for any errors, omissions, or interruptions of the S&P 500®.

B The Russell 2000® Index is a trademark of Russell Investments and has been licensed for use by affiliates of Brighthouse Financial, Inc. This annuity product is not sponsored, endorsed, sold, or promoted by Russell Investments, and Russell Investments makes no representation regarding the advisability of investing in this annuity product.

C This annuity product is not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such products or securities, or any index on which such products or securities are based. The annuity product prospectus contains a more detailed description of the limited relationship MSCI has with affiliates of Brighthouse Financial, Inc.

D Nasdaq®, Nasdaq-100®, Nasdaq-100 Index®, and NDX® are registered trademarks of Nasdaq, Inc. (which, with its affiliates, is referred to as the “Corporations”) and are licensed for use by Brighthouse Financial, Inc. Brighthouse Financial products have not been passed on by the Corporations as to their legality or suitability and are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THESE PRODUCTS.

1 Bloomberg, January 2023. This data reflects the historical 6-year price return of the S&P 500 Index on a rolling monthly basis. Rolling monthly periods include returns in overlapping cycles starting the last day of each month. For example, Jan. 31, 2018 through Jan. 31, 2019, followed by Feb. 28, 2018 through Feb. 28, 2019, are overlapping 1-year rolling periods.

Past performance does not guarantee future results.

Annuities are issued by, and product guarantees are solely the responsibility of, Brighthouse Life Insurance Company, Charlotte, NC 28277 and, in New York only, by Brighthouse Life Insurance Company of NY, New York, NY 10017 (“Brighthouse Financial”). Variable products are distributed by Brighthouse Securities, LLC (member FINRA). All are Brighthouse Financial affiliated companies. Annuities are long-term investments designed for retirement purposes. The contract prospectuses and contracts contain information about each contract’s features, risks, charges, expenses, exclusions, limitations, termination provisions, and terms for keeping the contract in force. Prospectuses and complete details about each contract are available from a financial professional and should be read carefully. Product availability and features may vary by state or firm.