How are the interest rates set for my indexed annuity?

It is based on changes in the index to which the annuity is linked. The formula may apply a Cap or Participation Rate so you can get a major portion or a portion of the index growth, yet meanwhile the formula ensures your interest rate NO less than zero in case the index declines. Conversely, in 2008, many investment accounts dropped over 40%, yet how did fixed indexed annuities do? They got 0% but didn’t lose a penny. You could move on with your life, and it was just a blip to your account.