What is the guaranteed minimum interest rate?
Much like traditional fixed annuities, equity indexed annuities offer a minimum guarantee of interest (assuming they are fixed indexed annuities). The reason they are considered “fixed” annuities is because of this minimum guarantee, unlike variable annuities that may have no “floor” to the contract values. There are, however, variable indexed annuities on the market, although lesser in number. 3% is a common minimum interest guarantee for fixed equity indexed annuities. In most cases though, it works differently than the typical 3% in traditional fixed annuities. Example (traditional fixed): $100,000 value at beginning of year earning 3% will result in $103,000 value at the end of the year. With many indexed annuities, the minimum guarantee will often be stated as 3% on 90% of your premium. This means that the minimum interest of 3% will be applied to 90% of your deposit(s). That minimum value at the end of the first year will earn 3% in the next year, and so on. Example: (fixed equit
