If an investor makes payments to a variable annuity, what happens when they decide to annuitize?

When an investor decides to annuitize a variable annuity, they are converting their investment into a stream of income payments. The payments they receive during the annuitization phase are directly tied to the performance of the underlying investments within the annuity. This means that as the value of the investments fluctuates, the income payments can also vary.

The performance of the mutual funds or other investment options chosen within the variable annuity can influence the amount of income the investor receives. If the investments perform well, the payments may increase; conversely, if they perform poorly, the payments could decrease. This characteristic of variable annuities makes them distinct from fixed annuities, where payments remain constant over time.

In summary, the nature of variable annuities allows for flexibility in income payments during the annuitization phase, which is a key reason why the correct answer is that the payments may vary based on performance.