Registered index-linked annuities in qualified retirement plans

Abstract

Many Americans remain financially underprepared for retirement. While automatic enrollment in employer-sponsored retirement plans has helped, target-date funds (TDFs) used as default investments have limitations. We propose target-date registered index-linked annuities (TD-RILAs) as a transparent, cost-effective alternative providing decreasing equity exposure over time. A theoretical analysis explores TD-RILAs' optimal structure and compares them to TDFs. A lab experiment examines investors' preferences, product transparency, default choices, and the role of information. We find that TD-RILAs are a suitable addition to retirement plans, potentially rivaling TDFs.