Business, Legal & Accounting Glossary
A variable annuity provides a varying rate of return on an investment. The variable annuity’s rate depends on the performance of the stock, bond and money market funds you chose as investment options. The insurance company paying the variable annuity may guarantee a minimum amount for future payments (often provided at retirement) while the remaining payments vary. Unlike an IRA, a variable annuity carries no restrictions on the amount of the annual investment. The periodic payments of a variable annuity offer you the comfort of knowing that you have less of a chance of outliving your assets. Another advantage of a variable annuity is that it is tax-deferred, meaning you pay no taxes on the income and investment gains until you withdraw the money. One must weigh these advantages against the risks and fees associated with a variable annuity before investing. In general, a variable annuity is meant to be a long-term investment.
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This glossary post was last updated: 5th February, 2020