What type of payment structure is associated with Variable Annuities?

Variable annuities are designed with a payment structure that directly correlates to the performance of the underlying investments chosen by the policyholder. This means that the payments can vary, often fluctuating based on the success or failure of these investments. As a result, if the investment portfolio performs well, the payments can increase, while poor performance can lead to reduced payments. This is a key characteristic of variable annuities, contrasting them with fixed annuities, which offer set and predictable payment amounts. The variability in payments allows holders the potential for growth tied to market performance, but also introduces the risk of decreased payouts.