504 / What is a variable deferred annuity?

The “accumulation period” lasts from contract issue until the annuity starting date (ASD) (see Q 536), during which the “accumulation units” of the separate accounts chosen will vary in value (and the contract value, which is the sum of those units, as well). Interest is not credited to a variable deferred annuity. Any contract “gain” is the result of increases in the value of the accumulation units chosen.

The “annuity” or “payout” period lasts from the ASD until the end of the annuity payout period chosen. During this period, the amount of each year’s annuity payments will vary to reflect investment performance unless a “fixed” annuity payout method has been chosen (in which case, the payouts will act like, and be taxed like, payments under a fixed contract.