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Finance Dictionary and Glossary of Investment Terms
A variable annuity is a contract between you and an insurance company or a bank in which you contribute money that grows tax deferred and receive a payout later, generally at retirement. Variable annuities differ from fixed annuities in that you decide how to invest your contributions. As a result, the size of your payout is variable — it depends on the success of your investments. Contributions to an annuity are made after taxes but all capital in the annuity grows tax-deferred, similar to employer-sponsored retirement plans or traditional IRAs.