Final answer:
Indexed annuities are connected to the stock market's performance but offer a minimum return rate, balancing potential growth with a degree of security. They are part of the suite of retirement savings options, lying somewhere between the security of fixed annuities and the risk and growth potential of stocks.
Step-by-step explanation:
The type of annuity that allows for investment returns exposed to the stock market while providing a minimum rate of return is the indexed annuity. Unlike a fixed annuity, which provides a guaranteed interest rate, an indexed annuity ties the potential return to a market index such as the S&P 500 but typically guarantees a minimum return to protect against market downturns. This means that while the returns may fluctuate based on the stock market performance, there is a safeguard in place to ensure that the annuitant will receive at least the minimum guaranteed return.
Understanding options for saving for old age is crucial, as personal savings, investing in property, or participating in workplace-sponsored tax-deferred accounts like 401(k)s are all means to ensure enough income for retirement. The inherent tradeoff between risk and return is evident across different types of investments. Stocks have high-risk potential with higher possible returns, whereas bonds offer lower but more secure returns, and savings accounts generally provide the lowest risk with correspondingly lower returns.