What does a "reset" typically refer to in the context of annuities?

In the context of annuities, a "reset" primarily refers to the determination of new payout rates. This process typically occurs at specified intervals during the life of the annuity contract. The reset allows the insurer to adjust the payout amounts based on various factors, which can include current market interest rates, changes in mortality rates, or the performance of the underlying investment options if applicable. As a result, the new payout rates reflect the most current financial conditions and the policyholder's circumstances.

This adjustment is significant for annuity holders as it can impact the income they receive over the life of the annuity, helping ensure that payouts remain relevant and aligned with economic conditions. Understanding the reset process is crucial for those managing their financial plans, especially retirees relying on annuities for sustained income.