Why might a client choose a variable annuity over a fixed annuity?

A client might choose a variable annuity over a fixed annuity specifically for the potential of higher returns based on investment performance. Variable annuities allow individuals to invest in a range of investment options, typically mutual funds, which can fluctuate in value and offer the possibility of greater returns compared to the guaranteed fixed returns provided by fixed annuities.

This choice is particularly appealing for clients who are willing to assume some level of investment risk in pursuit of potentially higher long-term gains. Variable annuities can be aligned with an individual’s financial goals, especially if they are looking for growth potential that can outpace inflation or meet specific future financial needs.

In contrast, while fixed annuities provide stability and predictability with guaranteed returns, they do not offer the same upside potential. Additionally, fees associated with variable annuities do exist, and managing these investments can be more complex than the straightforward nature of fixed annuities. Nonetheless, the desire for increased investment performance typically drives the decision to go with a variable annuity.