May be subject to state premium taxes. Death benefits, if any, are subject to ordinary income taxation on gains in the year of death unless the beneficiary elects a life income or installment option. Fixed annuities have a guaranteed return. Variable annuities provide a relatively safe means to get a higher potential return than fixed annuities. Payout options are flexible.
Interest accumulates tax-free until withdrawn.
Right to recover principal is lost once annuity payments start.