How is the payout calculated for a variable annuity?

In the context of variable annuities, the payout is indeed calculated based on a fixed number of annuity units, each of which has a value that fluctuates. This structure means that while the number of annuity units you hold is constant, the value of those units can change over time depending on the performance of the underlying investments in the annuity.

When the payout phase begins, the issuer determines the initial number of annuity units based on the accumulated assets at the time of conversion. As the investments within the annuity perform, the value of each annuity unit increases or decreases. Therefore, the overall payout can vary because it is directly tied to the changing value of the annuity units. This allows investors to participate in market growth while also accepting the risk of potential declines in value, which makes the payout in this structure more dynamic than one based on fixed values.