Beware of Backtested RILA Performance
November 15, 2022 by David Blanchett
Registered Index-Linked Annuities (RILAs) — also commonly referred to as index variable annuities, structured annuities, or buffered annuities — are an increasingly popular product.
RILAs can be viewed as an evolution of fixed indexed annuities (FIAs), to some extent. FIAs tend to be relatively one-dimensional, where the annuitant can’t lose money (i.e., the initial premium) but have limited upside. With RILAs, there is significantly more upside and downside potential, where the actual risk exposures vary notably by strategy.
Wink’s Note:I absolutely agree with David Blanchett on this-
One cannot assume current options costs, when applied to a historical period.
This is true of both indexed annuities and structured annuities.
Any backcasting that is done assuming current rates, during a historical period is patently false. Don’t rely on it. -sjm