Variable annuity is a kind of annuities alongside fixed annuity and indexed annuities, which is a tax-advantaged investment product that are issued from insurance companies, whereby the company agrees to make periodic payments to you starting either immediately or at a future date. While the variable annuity is a kind of deferred annuity, they vary from the contracts of fixed and equity indexed annuities in that their value varies directly with the market performance of investments held by the variable annuity you buy. Owing to this, you could experience higher profits over conventional fixed annuities, CDs and saving plans, but your investment and capital could also be at risk from unpredictable market instability.

The worth of your variable annuity will vary depending on the performance of the investment choices you select. The investment choices for a variable annuity are usually mutual funds that invest in stocks, bonds, money market instruments, or the combination of the three. Variable annuities are often invested in mutual funds but they vary from other investments in a good number of ways.

In the first instance, the insurance company invests your money into a separate account, made up of a number of different investment sub accounts. You stipulate how much of your annuity will be invested in each part, providing you power of where the value in your contract will be put in. Given the limitations of the investment divisions, you can be as forceful or as conservative as you would like. This empowers the variable annuity with the propensity for greater yields, but you must be ready to grapple with a great deal of loss.

A variable annuity also offers the opportunity to receive periodic payments for the rest of your life or in the case of you death to a named beneficiary, as in the case of an immediate annuity. This very feature can guarantee the security against the likelihood that you will live longer than your assets after you retire.

Variable annuities have a death benefit. In this case, if you die before the insurer started making payments to you, your beneficiary is guaranteed to receive a specified amount- often the amount of your original investment. Your named beneficiary will only get this benefit if at the moment of your death; your contract worth is less than the guaranteed amount.

Again, variable annuities are tax-deferred. This means that you will pay no taxes on the income and investment profits accrued from your annuity until you withdraw your funds. As part of the benefit, you may also transfer your fund from one investment choice to another within a variable annuity without paying tax at moment of the transfer.

The successful adoption of a variable annuity as a retirement plan bears on a number of factors which includes age, net worth, able to bear with the risk involve, investment preferences and growth expectations and others. It is true that a variable annuity can help you to diversify your asset allocation with some minimum amount of risk, but it is not the ultimate for one who hopes to invest in a totally risk free investment with regard to losses.