Variable annuity is a contract issued by an insurance company that is both a security and an insurance product. The annuitant’s contributions are invested through the separate account into a portfolio of securities. The annuitant’s payments depend largely on the investment results of the separate account.
Applying "Variable Annuity" to Securities Exams:
An investor may purchase a viable annuity to to help plan for their retirement. A variable annuity is consider to be a non qualified account and the contributions to the account are made with after tax dollars. The money in the variable annuity is allowed to grow tax defered. The growth portion of the account will be taxed when it is withdrawn from the account by the investor.