More About Annuities

What is an index annuity?

An index annuity is a fixed annuity offered by an insurance company. This index annuity earns a minimum rate of interest and offers the potential for excess interest based on the performance of an index. There are two major types of annuities in the world- fixed and variable. Variable annuities operate a lot like mutual funds in that most of the investment return (and risk) are passed to the investor. Fixed rate annuities operate more like an account at a bank paying a stated rate of interest. Fixed annuities pay a minimum guaranteed rate and the potential for more interest depending on the performance of an equity or bond index.

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