What is the typical guaranteed minimum interest rate in an indexed deferred annuity?

In the context of indexed deferred annuities, the typical guaranteed minimum interest rate is generally between 1% and 3%. This minimum interest rate provides a safety net for the policyholder, ensuring that even if the linked index performs poorly, the annuity will still accumulate at least a modest level of interest.

Indexed deferred annuities tie the interest earned to the performance of a specific market index, such as the S&P 500. While the potential gains can be significantly higher during favorable market conditions, the guaranteed minimum serves as a crucial feature for conservative investors seeking a degree of protection against market volatility.

Higher guaranteed rates, such as those suggested in the other options, are not common because they would require insurance companies to take on greater risk, which is typically not sustainable in the long term. Additionally, participation rates and caps further influence the final return but do not change the foundational minimum interest rate guarantee set forth in the annuity contract.