In a variable annuity, what impact does the selection of an investment option have?

In a variable annuity, the selection of an investment option significantly influences the payment amounts that the annuitant will eventually receive. Variable annuities allow investors to choose from a variety of investment options, typically mutual funds, which can vary in terms of risk, growth potential, and fees.

When an individual selects a particular investment option, the performance of that investment will directly impact the value of the annuity account over time. Since the value of the annuity can fluctuate based on the performance of these underlying investments, the eventual payouts to the annuitant during the withdrawal phase will also vary. If the selected options perform well, the annuitant may receive larger payments. Conversely, poor performance may lead to smaller payments.

While fees are indeed associated with these investment options and can vary, saying that they solely determine the fees overlooks the broader implications of investment performance on returns. Additionally, while the options chosen might have some impact on liquidity, access to funds in a variable annuity is not strictly restricted by the investment choice but rather by the terms of the contract and the age of the account holder. Overall, the correct answer emphasizes the critical role that investment selection plays in determining the outcomes for the annuitant.