Variable Annuities

Variable annuities are similar to individual retirement accounts: A customer's upfront payments go into tax-deferred investment funds (usually mutual funds) and the value of the investment depends on the performance of these underlying investment products. The return you get on your purchase payments depends on the performance of these investments. Like fixed annuities, your investment grows tax deferred and variable annuities also include a death benefit which includes the greater of the investment value of the annuity or a guaranteed minimum payout, which may be the sum of all of your past payments. As competition heightened for baby boomers' money in the past five years, insurers rolled out revved-up versions, including "guaranteed minimum income benefits" for life and "guaranteed minimum withdrawal benefits" over specified periods.