Explore commonly used personal finance terms.
The Assumed Interest Rate (AIR) is the rate of return that an insurance company assumes when calculating annuity payouts. AIR affects variable annuity payments, where higher assumed rates lead to higher initial payouts but increase the likelihood of payment reductions if actual returns fall short. This rate helps annuitants understand income stability, making it essential for retirement income planning. Choosing an appropriate AIR requires balancing income needs with realistic return expectations, minimizing income risk over time.
