what is variable annuitization 
variable annuitization is an annuity option in which the amount of the income payments received by the policyholder will vary according to the investment performance of the annuity variable annuitization is one option that can be selected by the policyholder during the annuitization phase of a contract which is the phase in which the policyholder exchanges the accumulated value of the annuity for a stream of regular income payments guaranteed for life or guaranteed for a specified number of years understanding variable annuitizationthere are two phases to the life of an annuity during the accumulation phase an investor adds into the annuity with all earnings that accrue during this phase being exempt from current income tax once a policyholder is ready to start receiving income from the annuity they can choose to make withdrawals on an ad hoc or systematic basis or annuitize the contract and elect either fixed or variable payments during the annuitization phase for annuities purchased with after tax dollars a fixed amount of each payment is treated as a non taxable return of the original basis and the balance is taxed as income alternatively all annuity income received through withdrawals is generally taxed as income until all the earnings have been withdrawn after all earnings have been withdrawn withdrawals are non taxable returns of the original already taxed investment in the annuity for annuities purchased with pre tax dollars all income whether via annuitization or from withdrawals is fully taxable as ordinary income variable annuity considerationschoosing how to receive payments from an annuity can be difficult for investors and often comes down to the amount of risk the policyholder is willing to take compared with the amount of returns the policyholder wants choosing a fixed annuitization means that the policyholder will receive the same amount of money in each periodic annuity income payment over the life of the annuity regardless of how the portfolio of the annuity company performs but variable annuity payments differ in that the value received by the policyholder is designed to vary over time this is because the payments are based on the performance of an underlying portfolio variable annuities are highly complex financial products according to the financial industry regulatory authority finra which regulates advisors they have multiple insurance features that might be appealing to some individuals but it s important to understand that those features come with a myriad of fees and charges because variable annuities are complicated and costly they require especially careful consideration 1considerations include how long your money will be tied up whether there are surrender charges or other penalties if money is withdrawn early what financial benefit or commission a firm receives for selling you the annuity what are the risks that the investment could lose value and what fees and expenses you can expect purchasing an annuity can provide a level of income security but can also lock in funds into a specific product that may not perform as well as expected professionals who sell annuities typically receive a commission based on the type and value of the annuity sold variable annuities values are tied to the performance of mutual fund like instruments called sub accounts the annuity owner selects 