An annuity that guarantees a minimum rate of return is?

A fixed annuity is designed to provide a guaranteed minimum rate of return, making it a reliable investment option for individuals seeking stability and predictability in their retirement savings. This type of annuity ensures that regardless of market conditions, the investor will receive at least a predetermined interest rate on their contributions.

Fixed annuities are particularly appealing to conservative investors who prioritize safety over higher potential returns. The certainty in the returns comes from the insurance company’s commitment to pay a specified interest rate, often compounded annually. This feature distinguishes fixed annuities from variable annuities, where returns can fluctuate based on the performance of underlying investments.

In contrast, other types of annuities, such as deferred annuities, single premium annuities, or variable annuities, do not offer the same guaranteed returns. Deferred annuities may delay payouts and earnings beyond a specified date, single premium annuities involve a one-time premium investment without guaranteeing a specific rate of return, and variable annuities are linked to market performance, thus lacking a guaranteed minimum return.