What is a potential consequence of poor investment choices in a variable annuity?

In the context of variable annuities, poor investment choices can lead to lower overall returns because the performance of the annuity is directly tied to the investment options selected by the policyholder. Variable annuities typically allow investors to allocate their funds among various investment vehicles, such as stocks, bonds, or mutual funds. If the chosen investments underperform, this will negatively affect the growth potential of the annuity.

Lower returns result from not capitalizing on the market's upward movements or by experiencing losses during downturns, impacting the value of the annuity when withdrawals or payouts are made. Therefore, it is crucial for investors to carefully evaluate their investment options and understand the inherent risks involved in their selections to maximize their returns within a variable annuity framework.

The other potential consequences, such as increased insurance premiums, higher management fees, or shorter payout periods, do not directly stem from poor investment choices but rather arise from different factors such as changes in the insurance risk assessment, fund management and performance, or terms set within the annuity contract.