What are the key factors affecting the payout amount of a variable annuity?

The payout amount of a variable annuity is primarily influenced by two significant factors: the age of the annuitant and the performance of the underlying investments.

The age of the annuitant is critical because it determines the length of time over which payouts will be made. Generally, younger annuitants will receive payments over a longer period, resulting in smaller annual payouts, whereas older annuitants may expect larger payouts over a shorter duration. This demographic factor plays a key role in calculating the annuity payments.

Underlying investment performance also directly impacts the payout. In a variable annuity, the payouts are based on the performance of the chosen investments, which can fluctuate. Higher investment returns can lead to larger payouts, while poor performance can decrease the amount received. This variability is a core characteristic of variable annuities, differentiating them from fixed annuities where payouts are predetermined.

The combination of the annuitant's age and the performance of the underlying investments thus creates a dynamic formula for determining the payout amount, making this choice the most comprehensive and accurate.