What is a Variable Annuity?

An annuity is a stream of income.  A purchaser makes periodic or one-time payments during the “accumulation phase” of an annuity so that at some point in the future they can trade those payments in for a stream of income.  The aspect of an annuity which makes it “variable” as opposed to “fixed” is the fluctuating performance of the sub-accounts which they invest in.  Typically, annuity sub-accounts are invested in mutual fund-like holdings which can own stocks, bonds, and alternatives.   The total contract value of your annuity will vary depending on the performance of the underlying investments. There is a lot of chatter about the positive and negative aspects of investing in variable annuities because of their complexity and potential expense.  I will explain further below:

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