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See how the pieces work.
A simple estimate or illustration can make a financial concept easier to understand.
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Independent educational estimator—not an official CalSTRS benefit estimate.How does indexed interest work?Open a simple animated example. No dollar projections.
A visual guide to interest crediting
How index-linked
interest crediting works.
A simple illustration of annual point-to-point crediting. The index moves up and down; interest is credited at each annual reset, subject to a cap and a 0% index-credit floor.
Hypothetical education only — not actual performance, a product quote, or a forecast.
Illustrative annual point-to-point example · 11% cap · 0% index-credit floor
Illustrative contract years
Gold markers show annual resets. The line heights reflect compounded example levels, not each year’s interest rate. This invented path favors the crediting line at the end; a different path can favor the index. Neither outcome predicts which will do better. The 11% cap is an example assumption, not a verified current product rate. This is not actual index history, a specific contract, or a projection of performance. *The credit floor applies before charges and withdrawals; actual net value can fall.
Explore the three example years, assumptions & contract considerations
−14% index → 0% credit
The crediting line stays level in this no-charge example. That is not a promise that an actual account’s net value can never fall.
+4% index → 4% credit
With the assumed 100% participation and no spread, this year’s increase is credited in full because it is below the cap.
+15% index → 11% credit
The index’s full increase is not credited. Only the capped 11% is applied at the annual reset in this example.
Assumptions held constant for this example
Annual point-to-point · 100% participation · 11% cap · 0% index-credit floor · 0% spread. The cap is held unchanged for ten invented years solely to explain the method; it is not a promise of future caps. This is not historical S&P 500 performance or an illustration of a specific insurer’s product. No fees, rider charges, deposits, withdrawals, taxes, or dividends are modeled. The crediting line is before charges, not net return or cash surrender value.
The 0% floor applies only to index-linked interest credit. Charges, withdrawals, surrender charges, and market value adjustments, where applicable, can reduce account or cash surrender value. A fixed indexed annuity does not invest directly in the index.
Real contracts differ. Nonguaranteed caps, participation rates, and other terms may change at renewal as the contract permits; this example holds them fixed. The actual contract governs. Guarantees depend on the issuing insurer’s financial strength and claims-paying ability. Annuities are not FDIC-insured.
See the example percentages and crediting method
| Year | Index change | Interest credit |
|---|---|---|
| 1 | +12% | 11% |
| 2 | −8% | 0% |
| 3 | +9% | 9% |
| 4 | −14% | 0% |
| 5 | +4% | 4% |
| 6 | +15% | 11% |
| 7 | +6% | 6% |
| 8 | −7% | 0% |
| 9 | +18% | 11% |
| 10 | +20% | 11% |
Method, not a product illustration
Each annual index change is invented. Both paths begin at the same starting level and use the same visual scale. The index line connects annual endpoints; it does not represent movement within a year.
Annual credit = max(0%, min(index change × 100% − 0%, 11%)). Each credit compounds on the preceding level, with the step occurring at the end of each one-year term. Zero-credit years stay level only because no deductions or withdrawals are included.
This is not a net investment-performance comparison, a recommendation, an income projection, or a statement of what your district’s plan offers. Real contracts may use different crediting methods; withdrawals before a term ends can affect interest credits. Consider costs, access to your money, and alternatives before deciding.
Independent consumer resources: NAIC fixed deferred annuity guide (PDF; new tab)California DOI annuity guide (PDF; new tab)FDIC coverage information (new tab).
An indexed annuity does not invest directly in the index. Charges and withdrawals can reduce value; caps may change at renewal. Guarantees depend on the insurer’s claims-paying ability. Not FDIC-insured. See how Eddie reviews your account’s growth features.
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General education, not individual financial, tax or legal advice. Account eligibility, plan rules and contract terms apply. Our role and disclosures.