Assumed Investment Return

What Does Assumed Investment Return Mean?

An assumed investment return is the return required on investments to maintain consistent variable annuity payments. Variable annuities, commonly used in life insurance, offer an alternative to fixed annuities. Unlike variable annuities, which are influenced by the performance of stocks, bonds, mutual funds, and other investments, fixed annuities provide a fixed rate of return and are not subject to market fluctuations.

Insuranceopedia Explains Assumed Investment Return

Many people include variable annuities in their life insurance policies because the investment component has the potential to increase the amount paid out by the annuity. However, the performance of these investments can affect the annuity payment levels. As long as the investments perform above the assumed investment return, the variable annuity payments will remain stable and not be subject to significant price fluctuations.