Variable Annuity Accumulation Units vs. Annuity Units
When a variable annuity contract owner annuitizes the contract and enters the payout phase, what conversion occurs?
Upon annuitization, the total value of accumulation units is converted into a FIXED number of Annuity Units. The number of annuity units never changes throughout retirement; the DOLLAR VALUE of each unit fluctuates with investment performance.
Complete Analysis & Legal Rationale
Monthly payout check = Fixed Number of Annuity Units × Fluctuating Annuity Unit Value.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Fixed number of annuity units with fluctuating unit values based on portfolio returns.
Reverses the direction of conversion.
Annuitization provides lifetime income, not immediate cash liquidation.
The NUMBER of annuity units is fixed; it never changes monthly.