What is a variable annuity?

A variable annuity lets you invest your money in market-based options like mutual funds inside the annuity, so your payments can grow if the investments do well. The upside is more growth potential, but the downside is real risk, since your value can fall when markets drop. These products also tend to carry higher fees than fixed annuities. They can make sense for some people, but it's wise to understand the costs fully before committing.