What Makes Variable Annuities Variable?
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What Makes Variable Annuities Variable?
Unlike fixed annuities, in which all your premiums go into the insurer’s general account and your interest and payments are fixed, variable annuities enable you to invest your premiums in your choice of separate accounts (investment accounts separate from the company’s general account). These separate accounts are commonly based on stock, bond, and money market funds.
Things To Know
- Variable annuities let you invest your premiums in your choice of separate investment accounts.
Performance factors
The value of your variable annuity and the amount available for payout can depend on the performance of the underlying securities in the separate accounts in which your premium is invested. As a result, variable annuities carry a level of risk that fixed annuities don’t have—the possibility that market values can lower the value of your annuity, or at least not increase it as much as a fixed-rate investment might. The tradeoff for this risk is the potential of greater returns than generally available with fixed annuities.
