What largely determines the variability in a variable annuity's monthly income?

The variability in a variable annuity's monthly income is primarily determined by the assumed interest rate (AIR) selected by the contract owner. The AIR represents the expected rate of return on the investment for the purpose of calculating the payouts from the annuity. If the actual performance of the investments exceeds the AIR, the income received can be higher than expected; conversely, if the performance falls short, the income will be lower. Since the AIR serves as a benchmark against which the year-to-year performance of the underlying assets is measured, it plays a crucial role in determining the variability of the monthly income.

Factors like the performance of the stock market do influence the underlying investments in a variable annuity, but it is the AIR that dictates how those performances impact monthly income. Additionally, while the age of the contract owner and the length of the investment period can influence the general structure or distribution schedule of the annuity, they do not directly determine the actual variability of the monthly income in the same way that the AIR does.