What do accumulation units represent in variable annuities?

Accumulation units in variable annuities represent a measure of ownership in the investment account. When an investor makes contributions to a variable annuity, those contributions are converted into accumulation units based on the performance of the underlying investment options chosen. Each accumulation unit corresponds to a fractional ownership of the total account value, which fluctuates based on the investment's performance.

As the investments grow, the value of the accumulation units increases, reflecting the growth or decrease in the market value of the assets held in the annuity. This is crucial for understanding how variable annuities operate since they are tied to market performance and can vary significantly over time. When the investor eventually decides to convert these units into income or withdraw funds, the number of accumulation units owned will determine the amount available for withdrawal or income generation.

This concept is essential for anyone dealing with variable annuities, as it directly ties to the investor's share in the account and reflects the potential for growth or decline based on market performance.