A variable annuity is an investment vehicle designed for
retirement savings. You may think of it as a wrapper around an underlying
investment, typically in a very restricted set of mutual funds. The selling
points of a variable annuity are that the underlying investments grow
tax-deferred, as in an IRA, and that when you retire, the annuity will pay you
an income, based on how well the underlying investment performed, for as long as
you live. Annuities are sold by insurance companies, and use an insurance policy
to provide the tax deferral. (Remember, tax deferral is not tax-free. It means
that taxes are delayed. That can be both good and bad.) Read more