RILAs in the decumulation phase

Abstract Registered Index‐Linked Annuities (RILAs) have quickly become one of the most popular retirement savings and investment vehicles in the United States. Researchers have analyzed their ability to help investors accumulate wealth—and have praised them for their relatively low cost and transparency—but have not yet considered whether RILAs can be a suitable component of retirement planning during the decumulation phase as well. This study aims to fill that gap by embedding RILAs in a lifecycle utility framework that models an investor's optimal decision‐making post‐retirement. In that context, I find that RILAs are essentially a like‐for‐like substitute for traditional mutual funds, in terms of both the total utility provided to the retiree and his optimal consumption and annuitization decisions.