What characterizes the Investment Configuration of an annuity?

The investment configuration of an annuity is characterized by offering either a fixed or variable rate of return, which may not necessarily keep pace with inflation. This means that while fixed-rate annuities provide a predictable but potentially lower return over time, variable-rate annuities can fluctuate based on the performance of the underlying investment options.

Because of this variability, there's a possibility that the returns could lag behind the rate of inflation, which erodes the purchasing power of the income generated by the annuity. This outcome highlights a common risk associated with both types of annuities: the potential for returns that do not adequately compensate for inflationary pressures in the economy.

This issue is particularly significant for consumers planning for long-term financial security through annuities. Recognizing that returns from annuities can vary while being aware that inflation can diminish the purchasing power of these returns is essential in financial planning.

The other options either suggest guaranteed returns that aren't reflective of general market behavior or imply that annuities can only provide fixed returns, which does not account for the full range of annuity types available in the market today.