Variable vs. Fixed Annuities
Insurance contracts for retirement income: a fixed annuity guarantees payments from the insurer's general account (insurance product, not a security); a variable annuity invests in separate-account subaccounts, so payments fluctuate — making it a security requiring registration and a prospectus.
Earnings grow tax-deferred; withdrawals of earnings are taxed as ordinary income and may face a 10% penalty before age 59½, plus insurer surrender charges in early years. During the payout phase, variable payments depend on separate-account performance versus the assumed interest rate (AIR).