An insurance contract in which you invest a lump sum or make ongoing optional payments. VAs offer a variety of investment options that are similar to mutual funds; as such, account value fluctuate based on the performance of the option(s) you choose. Variable annuities offer the potential for higher returns than fixed annuities but carry investment risk. Profits grow tax-deferred but are subject to ordinary income tax rates, which are higher than the tax rates assessed on the capital gains of mutual funds and exchange-traded funds. Liquidity is also restricted until age 59½. Because VAs are securities, they are regulated by the SEC as well as state securities regulators. See Annuity, Bonus Annuity, Fixed Annuity, Immediate Income Annuity
