In the context of Variable Annuities, what does it mean for payments to be non-fixed?

In the context of Variable Annuities, non-fixed payments imply that the amounts received can fluctuate based on various factors, primarily the performance of the investment options chosen within the annuity. This characteristic reflects the inherent risk and potential for growth associated with variable annuities. Unlike fixed annuities, where payments are predetermined and constant, variable annuity payments are tethered to the successes or failures of the underlying investments, such as stocks and bonds, which can lead to unpredictable returns.

The nature of variable annuities is that policyholders often have the flexibility to allocate their premiums to different investment portfolios, making their payouts subject to market volatility. Thus, a beneficiary or annuitant can experience higher or lower payments depending on the market’s performance at the time of withdrawal or payment, which encapsulates the definition of non-fixed payments in this context. This characteristic aligns with the investment component of variable annuities, distinguishing them from more stable, guaranteed products.