Enter a search term.
line drawing document and pencil

File a claim

Need to file an insurance claim? We’ll make the process as supportive, simple and swift as possible.

Action Teams

If you want to make an impact in your community but aren't sure where to begin, we're here to help.
Illustration of stairs and arrow pointing upward

Contact support

Can’t find what you’re looking for? Need to discuss a complex question? Let us know—we’re happy to help.
Use the search bar above to find information throughout our website. Or choose a topic you want to learn more about.

What is a variable annuity & how does it work?

Affectionate couple sitting on couch at home
Westend61/Getty Images/Westend61

The bottom line:

Deferred annuities are available in fixed and variable to match your risk tolerance.
Many variable annuities include investments tied to the stock market, along with an account that has a fixed rate of return. That provides opportunities to earn higher returns than fixed annuities offer. There’s also a risk for lower returns or financial loss.
Variable annuities offer tax-deferred growth. While paying in, you don’t owe taxes on your earnings. But when you take withdrawals later, you pay income tax on that money.

What is a variable annuity?

A variable annuity is a type of annuity that includes subaccounts invested in the stock market. No matter how its investments perform, a variable annuity can guarantee you’ll receive a series of payouts that start when you retire and last throughout your life, provided you annuitize (begin taking payments) before the contract loses all its value.

Your variable annuity’s investment performance may affect the size of the distributions you receive. Higher gains will likely translate into higher payouts. Lower gains—or losses—will likely result in smaller payouts.

gold line

What does a variable annuity offer?

A variable annuity offers several key features: income in retirement, potential tax-deferred investment growth based on market performance, and—depending on the contract—potential to pass money on to your heirs.

  • Income in retirement. Like other annuities, a variable annuity can provide ongoing income payments during retirement.
  • Investment growth potential. Variable annuities let you choose from a variety of investment options within your contract. Some people prefer this option over a fixed annuity, which grows in value based on a predetermined, fixed interest rate.
  • Tax-deferred growth. As with a 401(k) or a traditional IRA, a variable annuity’s earnings are tax-deferred. That means they aren’t taxed while you’re contributing to the annuity, which may result in higher growth. Later, when you take income payments out, that money is subject to income tax.
  • Potential to pass money on to your heirs. Most variable annuities also offer a standard death benefit. That's money paid to your beneficiaries if you pass away before annuity payouts begin. Optional death benefits may require a policy rider that comes with an additional cost.

Read more: How variable annuities can help support your retirement goals.

gold line

Immediate vs. deferred variable annuities

Immediate and deferred variable annuities differ based on how quickly they begin providing income.

Immediate variable annuities

An immediate variable annuity starts its payouts shortly after you put money in. You fund it with a single premium. Soon (within a year—and it may be within 30 days), it starts paying you income. That leaves little time for earnings to accumulate. Your recurring income payment amounts can change over time because they're tied to the performance of the annuity’s investment subaccounts.

Read: What is an immediate annuity & how does it work?

Deferred variable annuities

A deferred variable annuity requires a waiting period between the time you start putting money in and the time you receive its income stream. You can fund a deferred variable annuity with a single premium or a series of payments. Your income withdrawals begin when you retire (or at some other future date, as stated in your contract). Between the time you start making payments and the time you begin taking withdrawals, earnings can build up. Increasing your contract’s value can increase the income payments it provides. Many people use deferred variable annuities as part of their overall retirement planning strategy.

Read: What is a deferred annuity & how does it work?

gold line

Variable annuities vs. fixed annuities

Variable annuities differ from fixed annuities in the way they grow (or decrease) in value. A variable annuity’s value rises or falls based on the market performance of its investments. A fixed annuity is guaranteed to grow at a predetermined interest rate.

When considering one or the other, some people opt for the riskier variable annuity because it may achieve a higher rate of return. However, if the market trends downward, a variable annuity could earn less than a fixed annuity—or even lose all of its value.

A fixed annuity’s guaranteed interest rate may only promise a modest return. But it protects against the possibility of loss and offers the advantage of knowing ahead of time exactly how much the annuity's value will grow.

gold line

How can you use a variable annuity?

Say you’re 15 years from retirement. You have some money saved up and invested through a 401(k) or an IRA. Perhaps you have one of each. But you’re not sure they’ll provide enough money to support you through your retirement years.

If you have a lump sum of money available—or can fit a new recurring premium payment into your budget—you could put that money into a variable annuity. That would ensure you’d receive additional income starting on a designated date (your 65th birthday, for example) and lasting the rest of your life.

Knowing your annuity’s investment performance would likely affect how much money the annuity would pay out each year, you could choose how much risk to take on. Investing more aggressively could heighten your risk for loss—but also have potential for higher returns. Investing more conservatively might limit your potential loss but generate lower earnings. Often, it makes sense to base such decisions on how your other retirement savings vehicles are invested. That can help you build a well-balanced portfolio.

gold line

When should you consider a variable annuity?

That depends on many factors, including your age, your financial goals, your retirement plans, the resources you have available, the amount of risk you wish to take on, and how long you expect to live.

Have you maxed out your allowed Roth IRA or 401(k) contributions? Would you like to put more money away to help support yourself (and, perhaps, your spouse) in retirement? If so, a variable annuity may be worth considering. By choosing how to invest its subaccounts, you can make sure it fits well within your overall financial strategy. And knowing you have a guaranteed income stream coming might make you feel more confident about your retirement plan.

Want to learn more about if a variable annuity is right for you? Connect with a Thrivent financial advisor.

This web page provides general annuities information. It does not contain information specific to a Thrivent financial product. If you are looking for information specific to a Thrivent financial product or your existing annuity contract, please log in and refer to your contract or prospectus document—or visit our annuities product web page.
Annuities are intended to be long term, particularly for retirement. Product availability and features may vary by state.

Withdrawals and surrenders will decrease the value of your annuity and, subsequently, the income you receive. Any withdrawals in excess of 10% may be subject to a surrender charge. The taxable portion of each annuity distribution is subject to income taxation. If a taxpayer is younger than 59½ at the time of distribution, a 10% federal tax penalty will apply to the taxable portion of the distribution unless a penalty-tax exception applies.

Guarantees based on the financial strength and claims paying ability of Thrivent.

Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits.

Refer to the Thrivent Investment Management Inc. Form CRS Relationship Summary for more information about us; our relationships and services; fees, costs, conflicts, and standard of conduct; disciplinary history; and additional information. Refer to the Thrivent Investment Management Inc. Regulation Best Interest Disclosure document for information on fees, products, services, potential conflicts of interest, and additional information. Both are available upon request from your financial advisor or professional and on

Investing in a variable annuity involves risk, including the possible loss of principal. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the variable annuity contract and underlying investment options, which investors should read and consider carefully before investing. Prospectuses are available from a Thrivent financial professional or at

Thrivent and its financial professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

While diversification can help reduce market risk, it does not eliminate it. Diversification does not assure a profit or protect against loss in a declining market.