Do variable annuities guarantee a minimum payment regardless of market conditions?

Variable annuities typically do not guarantee a minimum payment without additional options. The inclusion of a Guaranteed Minimum Income Benefit (GMIB) is crucial for providing a guarantee. Under this option, an investor can secure a minimum level of income regardless of the performance of the underlying investments. This means that should the market perform poorly, the contract holder can still receive a predetermined payout, safeguarding their retirement income against market fluctuations.

Without the GMIB, variable annuities and their returns are closely tied to the performance of the selected investment options, which may result in higher risk and the potential for lower than expected payouts if the market declines. Therefore, having the GMIB option is important for those seeking the security of a guaranteed minimum income from a variable annuity.

The other choices do not capture the nuances of variable annuities and their guarantees accurately, which is why they do not provide a correct understanding of the implications of these financial products.